Christine Bartholomew: Too many groceries in one basket?


The Federal Trade Commission announced Feb. 26 the filing of a lawsuit in an effort to prevent Kroger from acquiring Albertsons. So what’s at stake?

The proposed $25 billion merger, announced in 2022, would combine Cincinnati-based Kroger, already the largest traditional U.S. supermarket chain, with Boise-based Albertsons, which became the fourth largest when it acquired Safeway.

The proposed merger involves more than 5,000 stores in 48 states. But millions of their customers, whose shopping routines could be affected if the deal goes through, may not recognize these brand names because they shop at supermarket chains large and small that the companies have acquired in recent decades through previous mergers.

Kroger owns 28 subsidiaries with nearly 2,800 supermarkets, including Fred Meyer, QFC, Fry’s, Ralph’s, Smith’s, Dillon’s, Pick’n Save, Pay Less, Harris Teeter, King Soopers, City Market, Owen’s, JayC, Baker’s Gerbes, Metro Market and Mariano’s Fresh Market.

Albertsons owns and operates more than 2,200 supermarkets through many brands, including, in addition to Safeway, Vons, Haggen, Shaw’s, Acme, Jewel-Osco, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Carrs, Kings Food and Balducci’s.

So, why does Kroger want to acquire Albertsons?

The companies argue that they need to join forces to compete against even bigger online and big box retailers.

Over the last two years, Walmart and Costco have gained market share while other chains have held steady or lost ground. Discount and alternative format stores, like Aldi, are also applying competitive pressure, as are dollar stores, one of the fastest-growing segments of U.S. retail.

If the merger goes through over federal opposition, the new company would cement its position, ensuring it has the largest market share for grocery purchases after Walmart.

By getting even bigger, Kroger and Albertsons contend, these already huge supermarket chains would gain more bargaining power, enabling them to charge lower prices, earn higher profits and spur more innovation. While that might sound like a good thing, they have provided few details on how these gains would be realized.

The government is getting involved out of concern that this merger could deny many shoppers the benefits of competition.

If the deal goes through, Walmart and Kroger/Albertsons would control more than 70% of the grocery market in more than 160 cities. Their dominance could empower them to drive up prices at a time when consumers are already feeling the pinch.

History has taught me and other scholars who study grocery store mergers to be skeptical about claims that adding more stores into ever-larger companies will lower prices and enhance competition.

When the FTC assessed the impact of 14 mergers in the supermarket industry, it found that though companies in virtually every merger promised lower prices, those promises came true in less than half the deals.

The proposed merger could possibly harm workers, too, the government contends. The FTC warns it could restrain wages, reduce benefits and weaken worker protections for the 720,000 employees working for supermarkets owned by the two companies.

Grocery expenses gobble up more than 11% of consumers’ disposable income. Even small price increases for eggs, milk and other groceries that most Americans regularly purchase can strain household budgets.

The FTC’s warning echoes the sentiment of many members of the United Food and Commercial Workers International Union, which has opposed the deal from the outset.

The central question in the case will be whether the proposed merger violates the Clayton Act. This 1914 law bars mergers that “may be substantially to lessen competition, or to tend to create a monopoly.”

Proof that mergers would result in higher prices isn’t necessary. Rather, there need only be an appreciable danger that the level of competition will decline.

The initial proceeding is administrative, meaning it would be heard by an in-house administrative judge. This judge will consider the impact of the merger on competition among supermarket chains, looking at variables such as whether it would increase market concentration and prices while undermining quality and innovation.

If the FTC and state attorneys general succeed in making that case, then Kroger and Albertsons have two choices.

They can argue that any such harm is offset by aspects of the merger that might boost competition in other ways and prove their claims that the merger would lower prices for shoppers. Alternatively, they can try to refute any evidence from the FTC supporting its claims that the merger would restrict competition among supermarket companies.

To make their case, Kroger/Albertsons would likely point to its plan to sell off more than 400 supermarkets to C&S Wholesale Grocers. The plan, announced in 2023, also calls for the sale of some distribution centers, private labels and other assets to help competition in places like California, Washington and Oregon.

These steps raise key questions that are hard and complicated to answer. For example, which markets could be harmed by a merger? Would the proposed plan to sell off some assets protect consumers who shop in those areas? The administrative judge will also, of course, need to assess the potential impact on workers.

Afterward, the case could go to a U.S. District Court for further review, meaning that resolving this dispute could take several more years.

The state attorneys general representing consumers in eight states – Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming – have joined this federal lawsuit. So has the attorney general in the District of Columbia, and two others, in Washington and Colorado, have filed litigation on their own.

The Colorado complaint may add additional antitrust concerns for the Kroger and Albertsons deal because it includes allegations that the companies have colluded to suppress workers’ benefits and wages. If proved, such conduct violates antitrust laws.

Even if the FTC is not successful, the enlarged supermarket company could face lingering antitrust scrutiny because it would still have to address the Washington and Colorado challenges. And even if those challenges fail, the companies will have to respond to the Colorado attorney general’s allegations of collusion.


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