The FTC claimed the deal would hurt supermarket competition for shoppers and workers and ultimately lead to higher grocery prices that would hurt consumers and depressed wages that would hit employees.
“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,” said Henry Liu, director of the FTC’s Bureau of Competition, in a statement. “Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating.”
Eight states and the District of Columbia joined the FTC in the lawsuit filed in the U.S. District Court in Oregon. The Attorneys General of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming joined the federal lawsuit.
What Kroger said about the lawsuit
Kroger said in a Monday statement the feds and the states have it wrong: "Blocking Kroger’s merger with Albertsons companies will actually harm the very people the FTC purports to serve: America’s consumers and workers," the grocer said, reiterating its promise to lower prices at the checkout.
It added that combining two companies with mostly union workers would be best to preserve jobs − a claim the government contests.
What to know about the merger
One of the largest-ever proposed retail mergers, Cincinnati-based Kroger's proposal has been divisive from the start. The deal to acquire its Boise, Idaho-headquartered rival affects a combined network of nearly 5,000 stores in almost every U.S. state and the employment of more than 700,000 workers.
The rivals' combined $170 billion food sales are nearly a fifth of America's $1 trillion grocery market. The deal also directly affects one out of six of all 4.2 million American workers at supermarkets, supercenters and club warehouses, according to the U.S. Bureau of Labor Statistics.
“The FTC’s decision reflects clear concerns over the impact such a megamerger could have on workers, food prices, and millions of customers," Perrone said Monday, in a statement. "The UFCW stands - and will continue to stand - in opposition to any merger that would negatively impact our hundreds of thousands of hard-working members who work at Kroger and Albertsons."
Several local UFCW chapters also applauded the lawsuit:
"UFCW local unions have loudly and soundly opposed the proposed mega-merger of Kroger and Albertsons since day one because the megamerger would have resulted in lost jobs, closed stores, food deserts, and higher prices," UFCW Locals 5, 7, 324, 400, 770, 1564, 3000, which represent 100,000 workers in California, Colorado, New Mexico, Oregon, Washington and Washington, D.C., said in a joint statement.
While it did not react to the legal challenge on Monday, one group of union grocery workers, endorsed the merger earlier this month: UFCW Local 555, which represents 18,000 workers in hundreds of stores in Oregon, Washington, Idaho and Wyoming. Union officials alluded to the intentions of the investment group that owns Albertsons to sell the grocer.
"(Albertsons workers that could become) employees of Kroger and C&S will be better off than employees of other potential buyers," Dan Clay, president Local 555, said in a Feb. 19 statement.
What to know about Kroger
Kroger already operates nearly 2,800 stores and employs 430,000 workers. With more than $148 billion in annual sales, Kroger is the nation's largest supermarket chain and the No. 2 grocer behind supercenter behemoth Walmart. Besides Kroger stores, the grocer operates several regional supermarket chains in 35 states, including Fred Meyer, Harris Teeter, Ralphs, Mariano's, Fry's, Smith's, King Soopers, QFC and others.
The lawsuit comes as persistent food inflation continues to dog American consumers and risks becoming a political issue in 2024: inflation at the supermarket has risen 24.7% since March of 2020 when the COVID-19 pandemic broke, compared to overall inflation, which has risen 20% in the same period, according to the U.S. Bureau of Labor Statistics.
"The cost of eggs, milk, chicken, gas, and so many other essential items have come down," Biden said. "But for all we’ve done to bring prices down, there are still too many corporations in America ripping people off."
States join fight against merger
The legal action comes after two other states in the past several weeks have filed separate state lawsuits: Washington on Jan. 15 and Colorado on Feb. 14, both making similar claims as federal antitrust officials.
Officials with the FTC on Monday called the divestiture plan "inadequate," claiming it would create a "hodgepodge of unconnected stores" that would be unable to compete against a combined Kroger-Albertsons.
The FTC noted C&S Wholesale currently owns just 23 supermarkets and one pharmacy and claimed the deal would not give it enough assets and resources to keep the divested stores competitive as a standalone business.
The regulator also pushed back against Kroger that combining two grocers with heavy union representation was a good thing. It noted the unions currently play Kroger and Albertsons off each other to enhance its bargaining postion. By joining most of those workers in one company, the union would lose power.
"The combined Kroger and Albertsons would have more leverage to impose subpar terms on union grocery workers that slow improvements to wages, worsen benefits, and potentially degrade working conditions," the FTC said.
What the White House had to say
In a Monday statement by the White House, the Biden administration declined to comment specifically on the FTC lawsuit, but said Biden supported antitrust efforts to ensure fair competition.
"The President supports fair and vigorous antitrust enforcement," said Jon Donenberg, a director for competition policy at the National Economic Council, in a statement. "President Biden has made clear that competition is key to capitalism. When large corporations are not checked by healthy competition, they too often do not pass cost savings on to consumers and exploit their workers."
