FTC: $25 billion Kroger-Albertsons merger harms consumers

The Federal Trade Commission (FTC) opened proceedings on Monday to block the $25 billion merger of Kroger with Albertsons, telling a federal judge in Portland, Oregon, that the deal would eliminate competition among the leading supermarket chains and hit consumers' wallets.

The FTC and several states filed suit in February to block the deal, arguing that the merger would mean higher prices for consumers and less bargaining power for unionized grocery workers.

FTC lead trial attorney Susan Musser asked U.S. District Judge Adrienne Nelson on Monday to stop the deal, saying in her opening statement that it would result in Kroger “swallowing” Albertsons.

“Stopping this multi-billion dollar deal will preserve strong competition that will curb rising food prices and spur improvements in quality and innovation,” she said.

Nelson is considering putting the deal on hold while an internal FTC judge examines what impact it would have on competition.

Such reviews can take years and companies often abandon deferred deals rather than complete the process.

Kroger and Albertsons are also expected to deliver their opening remarks on Monday.

Kroger and Albertsons have asked the judge to approve the deal, saying the merger is necessary to compete with multinational corporations such as Walmart, the largest grocery retailer in the United States, big-box retail giant Costco and Amazon, which owns Whole Foods.

Kim Cordova, president of a Colorado and Wyoming chapter of the United Food and Commercial Workers International Union, expressed skepticism about this argument at a press conference outside the courthouse.

“We do not believe the company’s promises that it is doing this for competitive reasons,” she said.

The case is a high-profile part of the Biden administration's efforts to lower prices for consumers, and it comes at a time when high grocery bills are playing a major role in the presidential race between Democratic Vice President Kamala Harris and her Republican opponent, former President Donald Trump.

It is also an important test of FTC Chair Lina Khan's initiative to use antitrust law to increase worker wages and mobility.

The trial is expected to last about three weeks and will provide evidence of how large grocers and smaller competitors set their prices and view competition in the industry.

Kroger and Albertsons say the lawsuit's focus on traditional supermarkets ignores the fact that consumers typically shop for groceries at a variety of locations, including big-box stores like Target and dollar stores like Dollar Tree.

Kroger has said it plans to sell 579 of the roughly 5,000 stores it would own if the deal goes through. Part of the process will focus on whether buyer C&S Wholesale Grocers can successfully run those stores.

Kroger has also promised to cut grocery prices by $1 billion after the merger.

Retailers use several levers to reduce prices, including negotiating more favorable terms with suppliers, investing in supply chain automation, or changing the labeling and packaging of their products.

While Kroger said it could not provide more specifics on the price investments, a source familiar with the matter indicated that the price reductions will likely initially be focused on key and high-demand items.

“Initially, it will not be about peanut butter spread, for example, but a wide range of staple foods,” the source said.

Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming and the District of Columbia are pursuing the case alongside the FTC.

Washington and Colorado have also filed lawsuits to block the merger, with trials set to follow the Oregon case.

There are Kroger and Albertsons stores in every state.