Albertsons and Kroger supermarkets
Bridget Bennett | Bloomberg | Getty Images; Brandon Bell | Getty Images
The U.S. Federal Trade Commission said Monday that it has filed a lawsuit against the merger of Kroger and Albertsons, saying the combination of the two major grocers would result in higher prices for shoppers and lower wages for workers.
In a news release, the FTC said it had filed an administrative complaint and approved a lawsuit in federal court to stop Kroger's $24.6 billion acquisition of Albertsons, which would create one of the largest grocers in the country. A bipartisan group of nine attorneys general have joined the court's appeal, including from Arizona, California, Washington DC, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming.
“Kroger’s acquisition of Albertsons would result in further grocery price increases for everyday goods and further exacerbate the financial burden facing consumers across the country today,” said Henry Liu, Director of the FTC’s Bureau of Competition. “Grocery store workers would also suffer from this deal, as they risk seeing their wages reduced, their benefits reduced and their working conditions worsened.”
Kroger said in a statement that blocking the deal “will actually harm the very people the FTC claims to serve: America's consumers and workers.”
“The FTC’s decision makes it more likely that American consumers will experience higher food prices and fewer grocery stores at a time when communities across the country are already facing high inflation and food deserts,” the company said in a statement.
Albertsons said in a statement that federal regulators are wary of the growing dominance of larger retailers such as Walmart, Amazon and Costco and said the move would strengthen them.
“We are disappointed that the FTC continues to take the same outdated view of the U.S. food industry as it did 20 years ago, and we look forward to presenting our arguments in court,” it said in a statement.
The deal between Kroger and Albertsons has been on hold for more than a year as federal and state regulators review the merger. The companies announced the proposed deal in October 2022, saying the collaboration would allow the grocers to better compete with larger retailers.
The FTC argued that the supermarket merger would hurt shoppers and workers even as prices for groceries and many everyday items rose. The Biden administration has been skeptical of a number of mergers, and the White House has made consumer protection a key issue as President Joe Biden fights for re-election this fall.
Kroger CEO Rodney McMullen has advocated for the merger, saying that as a larger supermarket operator, the combined companies would be able to lower prices, increase profitability and accelerate innovation in the grocery industry. The company also pledged $500 million to lower prices for customers and $1 billion to increase employee wages and expand benefits.
Nevertheless, after a period of historic inflation, the agreement encountered fierce opposition and new complications. Two unions representing Kroger and Albertsons employees, the United Food and Commercial Workers International Union and the Teamsters union, opposed the deal.
Higher prices for everyday groceries raised fears that a larger company would have too much pricing power – concerns that some politicians have taken up.
Higher food prices have angered consumers and become a hot topic in the election campaign. Earlier this month, grocery chains drew the ire of Biden, who accused the companies of ripping off customers while keeping profit margins high.
Together, Kroger and Albertsons would be a mammoth company and would narrow the market share gap with Walmart, the largest grocery retailer in the United States. Kroger and Albertsons also compete with regional players such as Publix and Wegmans, as well as discount retailers such as Aldi and Trader Joe's.
Combined, the grocers would have about 5,000 stores across the United States. The deal would combine Kroger's roughly two dozen supermarket brands, including its namesake Fred Meyer and Ralphs stores, with Albertsons' grocery chains, including Safeway, Acme and Tom Thumb.
To address antitrust concerns, Kroger announced last year that it planned to sell more than 400 stores to Piggly Wiggly owner C&S Wholesale Grocers, along with other assets such as distribution centers and some private label brands.
However, the FTC complaint said the proposed divestiture was not enough. It would create “a hodgepodge of unrelated stores, banners, brands and other assets” that would not be a true competitor to the Kroger-Albertsons combination, the federal agency said in a news release Monday.
The FTC claimed that Kroger and Albertsons together had less reason to improve the customer experience. The federal agency said competition among supermarkets has contributed to fresher products, better private label offerings and services valued by shoppers such as flexible pharmacy hours and curbside pickup.
The FTC also argued that the agreement would give workers less bargaining power because workers would not have as many potential grocery employers. In some markets, such as Denver, the combined supermarket operator would be the sole employer of union grocery workers, the agency said.
When some news outlets reported last week that the FTC would soon sue to block the merger, a Kroger spokeswoman said the company was still in discussions with the FTC and state regulators.
The company reiterated its argument that the merger would benefit both grocery shoppers and workers.
“Blocking the merger will only encourage large, non-union retailers – like Walmart, Amazon and Costco – to continue defying unions and leaving communities,” the company said in a statement last week. “Kroger will continue to lower prices, create good-paying union jobs and increase access to fresh food for the families who need it most.”
Kroger shares were trading about 1% lower Monday afternoon, while Albertsons shares were slightly higher.