FTC files lawsuit against Kroger-Albertson merger
The Federal Trade Commission has filed a lawsuit aiming to prevent the largest proposed supermarket merger in U.S. history — The Kroger Co.'s $24.6 billion deal with the Albertsons Cos. — saying that the merger is anticompetitive.
The FTC claims that the proposed deal will eliminate fierce competition between Kroger and Albertsons, leading to higher prices for groceries and other essential household items for millions of U.S. consumers. The FTC also said in the filing that the loss of competition will also lead to lower-quality products and services while also narrowing consumers’ choices for where to shop for groceries.
“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 news release. "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.”
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The FTC issued an administrative complaint and authorized a lawsuit in federal court to block the proposed acquisition pending the commission’s administrative proceedings, according to the release. A bipartisan group of nine attorneys general is joining the FTC’s federal court complaint, including the attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming are joining the commission’s federal lawsuit. the release said.
The commission vote to issue the administrative complaint and authorize staff to seek a temporary restraining order and preliminary injunction in federal district court was 3-0. The federal court complaint and request for preliminary relief will be filed jointly with the state attorneys general in the U.S. District Court for the District of Oregon.
Kroger operates thousands of stores across 36 states, which includes regional banners such as Fred Meyer, Fry’s, Harris Teeter, King Soopers, Kroger and Quality Food Centers. Albertsons also operates thousands of stores across 35 states under regional names including Albertsons, Haggen, Jewel-Osco, Pavilions, Safeway and Vons. If the merger were completed, Kroger and Albertsons would operate more than 5,000 stores and approximately 4,000 retail pharmacies and would employ nearly 700,000 employees across 48 states.
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The FTC further claims, in addition to raising grocery prices, that Kroger’s acquisition of Albertsons would also diminish their incentive to compete on quality and that the deal would eliminate head-to-head price and quality competition, which have driven both supermarkets to lower their prices and improve their product and service offerings.
An Albertsons Cos. spokesperson responded to the FTC lawsuit stating, “Albertsons Cos. merging with Kroger will expand competition, lower prices, increase associate wages, protect union jobs and enhance customers’ shopping experience. If the Federal Trade Commission is successful in blocking this merger, it would be hurting customers and helping strengthen larger, multi-channel retailers such as Amazon, Walmart and Costco — the very companies the FTC claims to be reining in — by allowing them to continue increasing their growing dominance of the grocery industry. In contrast, Albertsons Cos.’ merger with Kroger will ensure our neighborhood supermarkets can better compete with these mega retailers, all while benefitting our customers, associates, and communities. 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.”
Kroger also responded to the FTC lawsuit, stating in a news release, "Contrary to the FTC's statements, blocking Kroger's merger with Albertsons Companies will actually harm the very people the FTC purports to serve: America's consumers and workers. Kroger's business model is to take costs out of the business and invest in lowering prices for customers. Kroger has reduced prices every year since 2003, resulting in $5 billion invested to lower prices and a 5% reduction in gross margin over this period. This business model is immediately applied to merger companies. Kroger has a proven track record of lowering prices so more customers benefit from fresh, affordable food, and our proposed merger with Albertsons will mean even lower prices and more choices for America's consumers. The FTC's decision makes it more likely that America's consumers will see higher food prices and fewer grocery stores at a time when communities across the country are already facing high inflation and food deserts. In fact, this decision only strengthens larger, non-unionized retailers like Walmart, Costco and Amazon by allowing them to further increase their overwhelming and growing dominance of the grocery industry."
