Posted on 02/26/2024 9:47:24 PM PST by SeekAndFind
In October 2022, I shared a big announcement in the retail world: Two massive, U.S. grocery store chains, Kroger and Albertsons, had agreed to merge, in a deal worth nearly $25 billion:
CNBC:
Rival grocers Kroger and Albertsons on Friday announced plans to team up.
The companies said Kroger agreed to buy Albertsons for $34.10 a share in a deal valued at $24.6 billion. Albertsons shares had closed Thursday at $28.63 after surging on reports that a deal was imminent.
Kroger is the second-largest grocer by market share in the United States, behind Walmart, and Albertsons is fourth, after Costco. Together, Kroger and Albertsons would be a closer second to Walmart.
Both companies’ boards unanimously approved the agreement, which will also need regulatory approval.
It can’t be exaggerated how massive this new, “Frankenstein” monster of a food chain would be–and how it would affect how many Americans shop across the country. Here are the stats for both companies, via the AP:
Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like Ralphs, Smith’s and Harris Teeter. Alberstons, based in Boise, operates 2,273 stores in 34 states, including brands like Safeway, Jewel Osco and Shaw’s. Together the companies employ around 710,000 people.
BACKGROUND: Two Massive, US Grocery Chains Could Be Headed for Merger
Tucked in the fine print of the news stories I read, though, was the foreshadowing of a potential snag in the companies' plans ... in the form of federal regulators filing a lawsuit. Now, that's come to pass. The Federal Trade Commission (FTC) and nine state attorneys general filed a lawsuit Monday in federal court meant to block the merger of Kroger and Albertsons:
The Federal Trade Commission sued to block a proposed merger between grocery giants Kroger and Albertsons, saying the $24.6 billion deal would eliminate competition and lead to higher prices for millions of Americans.
It .... filed a lawsuit with the U.S. District Court in Oregon requesting a temporary injunction blocking the merger. That lawsuit was joined by the attorneys general of eight states and the District of Columbia.
In a press release, the agency explained why it chose to file the suit:
The FTC charges 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 Americans. The loss of competition will also lead to lower quality products and services, while also narrowing consumers’ choices for where to shop for groceries. For thousands of grocery store workers, Kroger’s proposed acquisition of Albertsons would immediately erase aggressive competition for workers, threatening the ability of employees to secure higher wages, better benefits, and improved working conditions.
Its suit also argued that the companies' proposed divestiture of hundreds of stores a piece to a third-party chain was "inadequate," and would fail to maintain the competition between the chains that keeps prices low and wages high--especially for union workers and their unions:
Kroger and Albertsons are the two largest employers of union grocery labor in the United States. They actively compete against one another for workers.[...]
Currently, most workers for both supermarket chains are members of the United Food and Commercial Workers (UFCW) union.
The FTC added that the suit will give an FTC administrative judge time to review its concurrently filed administrative complaint against the grocers. The attorneys general who signed on to support the legal move represent eight states (Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming), and the District of Columbia.
Henry Liu, Director of the FTC’s Bureau of Competition, said in a statement:
This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years. 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.
The companies responded to the suit, countering the agency's charges that a merger would harm shoppers and union workers:
The companies have argued that together they could better face stiffening competition from Amazon, Walmart, Costco and even dollar stores. In fact, Kroger on Monday argued the FTC's rejection of the merger would lead to higher food prices and fewer grocery stores.
"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," a Kroger spokesperson said in a statement.
Albertsons shared a similar statement, adding that the FTC's view of the grocery industry is "outdated" and it looked forward to presenting its views in court. The case is likely to go to trial in the coming months.
"The fact of the matter is, people are not shopping at Amazon as a substitute for going to their local grocery stores," Rahul Rao, deputy director of the FTC's Bureau of Competition, told NPR. "The other store formats don't actually compete on a day-to-day basis" with Kroger and Albertsons.
But as my colleague Bob Hoge wrote on big-box retailers' woes in the era of Bidenomics, the government might have a slight point about the differences between what traditional stores and outlets like Walmart and Amazon Fresh do. He wrote in February 2023:
The retail world continues its downward spiral, as holiday sales failed to meet expectations and wary consumers are keeping their wallets in their pockets due to rampant inflation and soaring interest rates.[...]
The end result: over 800 big-box stores are slated to shut down across the country in 2023.
Bed Bath & Beyond, Walmart, Gap, and Party City are among the big names who will be downsizing.[...]
Macy’s, Big Lots, JCPenny, and even Amazon Fresh grocery stores also have plans to shutter locations.
But an argument can be made that the dip in consumer spending has also hit Kroger and its competitor, Albertsons. Hoge wrote:
Unfortunately, this is not a new trend. CVS, Rite-Aid, Kroger, Nordstrom, and Best Buy have also been quietly culling their stores over the last several years.
Both Kroger and Albertsons say they will challenge the FTC's suit. We'll see where this lawsuit lands in a few months. Stay tuned.
You can read the pdf of the FTC's complaint here.
I think Americans are tired of gigantic, overbearing monopolies ruling them and would like to see them broken up. We also need to address foreign ownership of American companies.
Wow! Next thing you know they’ll want to ban ban the merger of A&P and Colonial Stores.
I say let the merge
happen. Smaller towns
will benifit from better
selection. Walmart dominates
the grocery market in
smaller towns across the
US.
Unless I'm missing something awful about this merger, Maryland embarrasses the world again. Hard to tell why Wyoming signed on -- they have a Republican governor, but then again, isn't he into carbon capture and storage, too?
I am against huge companies merging; the government needs to encourage competition and free market capitalism. I also see the contradictory principle at play in that position.
Still trying to reconcile. But when FEWER businesses are in any given market it is almost always to the detriment of the consumer.
We need more competition in the airline industry, in media, in food production and distribution, in communications, in banking and financial services...
And the trend of putting more power into the hands of fewer corporations is dangerous, especially as the board rooms grow more and more woke.
Weird situation. The more government is involved in anything the worse conditions get.
I don’t see this proposed merger as nefarious or having any monopolistic price gouging for Americans by going through with it. There are a Lot of different to buy food, not just them.
With that said, they should immediately CLOSE All their Stores in the Capitol Cities of these States in an effort to increase competition, let somebody else open a grocery store there, with any luck, the City will starve to death before it happens.
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