Kroger-albertsons merger would hurt shoppers, critics say
Kroger and Albertsons — two of the biggest grocery chains in the United States — had hoped to complete the largest supermarket merger in the country’s history this year. But their plan to compete with big-box retailers by combining forces faces legal challenges that make it look far less likely, at least any time soon.
On Monday, the U.S. Federal
Trade Commission filed an administrative complaint against Kroger’s $24.6 billion deal to acquire Albertsons and a federal lawsuit that asks a judge to block the merger. Attorneys general from eight states, including Nevada, and the District of Columbia joined the lawsuit lodged in Oregon.
Here’s what to know about the proposed merger, what it might mean for shoppers — and why the U.S. government opposes it.
Why does merger matter?
Most Americans have filled a basket at an Albertsons or a Kroger store even if the sign out front had a different name. Kroger, based in Cincinnati, operates 2,750 stores in 35 states and the District of Columbia. The company’s 19 brands include Ralphs, Smith’s, King Soopers, Fred Meyer, Food 4 Less, Mariano’s, Pick ’n Save and Harris Teeter. Albertsons, based in Boise, Idaho, operates 2,273 stores in 34 states. Its 15 brands include Safeway, Jewel Osco, Vons, Acme and Shaw’s. Together, Kroger and Albertsons employ around 700,000 people.
Cities where Kroger-owned and Albertsons-owned stores now vie for customers include Los Angeles, Seattle, Portland, Denver, Phoenix, Dallas, Chicago and the District of Columbia.
What would merger mean?
Some labor unions and consumer advocacy groups predict the merger would result in store closures, leaving communities with fewer grocery options and giving Kroger-albertsons fewer incentives to keep prices down.
“A merger of Kroger and Albertsons would dramatically decrease competition within an already consolidated food retail market, which would result in fewer grocery stores and higher food prices, with predictable adverse consequences for food and nutrition security for consumers across the country,” Peter Lurie, president of the Center for Science in the Public Interest, said in a statement applauding the FTC’S action.
Kroger says no stores would close from the merger. It also promises to invest $1.3 billion to update Albertsons’ existing outlets.
Why does FTC oppose merger?
The FTC says the deal would eliminate the competition that now exists between Kroger and Albertsons, and without competition, buyers would see higher prices, lower quality and fewer shopping choices. In a separate lawsuit filed this month, Colorado’s attorney general gave a specific example. The city of Gunnison, Colorado, has two groceries: Kroger-owned City Market and Albertsons-owned Safeway. The merger would make Kroger the only chain operating in this area, and a Gunnison resident would have to drive 65 miles to a non-kroger store.
Consumers also would see fewer deals if the stores merged because Kroger and Albertsons currently use promotions to lure shoppers away from the competition, according to the FTC. The agency also foresees less incentive for stores to add or improve services. When Albertsons executives saw unstaffed deli counters at Kroger’s Fred Meyer stores, they added counter staff at their stores. In the same way, Kroger improved its grocery pickup services in some markets to compete with Albertsons.
The FTC says competition at supermarket pharmacy counters also benefits consumers. When Kroger went out-of-network with a major pharmacy benefits administrator last year, Albertsons offered consumers a $75 grocery coupon to transfer their prescriptions.
When will issue be decided?
Kroger and Albertsons can file a response to the FTC’S administrative complaint within 14 days. A hearing has been set for July 31. While the case winds its way through the agency’s legal process, the FTC wants a federal judge to issue a temporary injunction barring the merger. Kroger and Albertsons have said they will appeal any adverse rulings.