The Federal Trade Commission, alongside a coalition of state attorneys general, filed a lawsuit seeking to block Kroger's (KR) proposed $24.6 billion acquisition of Albertsons (ACI). Nevada Attorney General Aaron Ford, one of the attorneys suing, joined Yahoo Finance Live to discuss his concerns about the merger.
Ford says the deal heightened worries around "power pricing for groceries," "employee wages and benefits", and potential store closures that could reduce competition in local markets. He notes the current price competition between Kroger and Albertsons is "a good thing" that would disappear in a merger.
In Nevada specifically, Ford adds, some consumers already drive long distances for groceries. Store closures from the deal could create "food deserts" in rural areas. He also references surveys showing shoppers worry prices would rise if the chains combined.
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Editor's note: This article was written by Angel Smith
Video Transcript
SEANA SMITH: The Federal Trade Commission and a coalition of attorneys general are suing to block Kroger's $25 billion acquisition of Albertsons. Nine states currently scrutinizing the grocery stores mega merger.
Now, among them is Nevada attorney general Aaron Ford, who believes that the deal would create an anti-competitive marketplace. We want to bring him in now. Aaron Ford is Nevada's attorney general. Attorney general, thanks so much for taking the time to speak with us here this morning.
Clearly, you're looking to challenge this suit. I'm curious as to why you don't support this deal. Why do you see this as a risk here to consumers?
AARON FORD: Well, first off, thanks so much for having me on to have this important conversation. But to your question, this is an example of where there was a major confluence between the data that we analyzed, the legal research that we did, and the community input that we received. And it all aligned and led us to the conclusion that opposing this merger was going to be appropriate for a number of reasons.
Listening to our constituents, we learned through my Bureau of Consumer Protection, through the dozens of community engagement sessions that we had with Chair Khan actually from the FTC-- actually, visiting three of those with me-- we learned about concerns about higher prices for groceries, concerns about stores that would be closing, and concerns about employee wages and benefits.
And, again, those were repeated through the data that we did in the legal analysis that we did that determined that, in fact, there were big concerns around competition in those areas. And so that's largely the reason why we decided to join this bipartisan coalition to oppose this merger.
SEANA SMITH: Attorney general, there has been pushback obviously from the two parties that are involved. But even more broadly speaking from industry experts or former FTC members that are saying that, hey, when you look at the competition from Walmart, you look at the competition from Amazon, the fact that you have two giants within this space that if this deal is not approved, it's going to give them even more power.
I'm curious how then you see that as being OK or maybe not having that big of an issue with it when you compare that to what could play out with more pricing competition.
AARON FORD: Well, it's the latter part that you just mentioned that gave rise to this lawsuit. At the end of the day, we think that the competition that currently exists between Kroger and Albertsons in terms of groceries, for example, in terms of the pharmacy services, for example, and in terms of the labor market, those far outweigh the countervailing issues that were raised by the parties who are seeking to enter into this merger.
We've seen price competition as a good thing, as between Kroger and Albertsons. That will go away in a merger. We've seen the promotion of pricing discounts. We've seen product quality competition between these two entities. And, again, that will all go away, as would the store condition competition and customer service competition. And that's just in the grocery context.
We're not even touching on the pharmacy context in the labor market. And so we see those, again, as very real issues that we have to stand up against. And try to protect our relevant constituencies from.
BRAD SMITH: If this deal was to go through, is it clear from your assessment, what type of food desert situation this would also add onto or layer onto, not just within Nevada, but within a lot of regions within the country?
AARON FORD: Well, let me actually back up just for a second and want to suggest that you two, when you come into our state, I don't want you to get priced-- up charged. You have to say Nevada, our state of Nevada.
BRAD SMITH: Nevada. Look--
AARON FORD: If you get upcharge, you can't call me. That's not price gouging, when you get upcharged.
SEANA SMITH: I thought about that right after I said it too.
BRAD SMITH: Last time I was in Las Vegas, they let it slide, because there's a lot of other things they let slide in Las Vegas.
AARON FORD: My apologies. But to your point, that's a very great question. And that's a very real issue. Food deserts are already prevalent in our state here. And, in fact, I went out to a rural area called Pahrump and was advised. And I'm glad we went out there and talked to the constituents there, because they reminded us that they're rural, but we have frontier in Nevada as well that drives to rural areas 100 miles every month or so to do their shopping.
And if one of those stores is affected, then those frontier areas are likewise affected. And so certainly, food deserts is a concern that also peaked its head and piqued my interest and supported my decision here to join this litigation.
SEANA SMITH: I'm curious, attorney general, beyond and you mentioned the conversations that you're having with Nevadans within your state, what are you hearing just in terms of how much pressure they are still under given the fact that inflation remains well above that 2% target that we have for the Fed? And are they, at all, optimistic about some of the progress that has been made in the Fed's fight against inflation?
AARON FORD: Well, I think I have two answers to that. The first-- and I'll take the latter one first. They are happy, obviously, that we're seeing some fluctuations. And in some areas, a decrease in pricing that makes it more affordable for some homes.
But as a general matter, people are quite disturbed with the pricing of groceries. And, again, that speaks specifically and directly to the competition that Kroger and Albertsons currently have. And if they merge, the concern is that those prices will continue to go up. And I have heard from so many constituents.
We met with, again, in person at least a dozen meetings. But we had over 1,000 online responses to our survey, which, obviously, are confidential. But the crux of those were exactly the same. People were concerned about the pricing of groceries and overwhelmingly opposed to what's being proposed here.
BRAD SMITH: What was the largest finding from that survey? You mentioned it's confidential. But I wonder if there's one thing that could really steer the decision making, both from the FTC, as well as from the team of attorney generals that have essentially come together to really spotlight this deal and, at least, give some direct feedback that results in taking a second look at this tie-up.
AARON FORD: Yeah. Listen, I think it's fair to say that the concerns we received in those surveys echoed what we had already heard in the open sessions and what is already detailed in our redacted complaint. Concerns about the higher prices for groceries, concerns about stores that were closed, labor concerns, concerns about wages and benefits.
Some of these places have pharmacies in them. And the problem that could be caused, if these stores merge and certain opportunities to get prescriptions refilled, would go away.
Some of them even have gas stations at them. And so we heard a few concerns about what would happen in that regard. And so those were, again, concerns that were echoed in other aspects of our investigation. And, again, that gives us great concern.
