The Kroger Albertsons merger hearing has ended. What happens next?
PORTLAND, Ore. – Attorneys for the Federal Trade Commission and Kroger and Albertsons ended their three-week court battle the same way they started: diametrically opposed over whether the two grocery rivals should be permitted to join forces.
Lawyers for the regulator said the $25 billion proposed transaction would eliminate critical grocery store competition and lead to higher prices for consumers while endangering jobs for tens of thousands of workers and threatening communities with potential store closures and food deserts.
Parting thoughts as hearing concludes
“Consumers depend on competition,” FTC attorney Susan Musser told the court, dismissing the grocers’ argument that consumers were awash in competition with a variety of retailers selling food. “Common sense says these aren’t a good substitute for supermarkets.”
Attorneys for Kroger and Albertsons insisted the deal would boost competition by strengthening both companies as a unified company, repeated company promises to lower grocery prices by $1 billion and not to close stores or lay off front-line workers.
“Millions of shoppers are going to see their bills go down,” Kroger attorney Matt Wolf told the court, adding workers would see their pay increase and communities would enjoy Kroger stores in addition to proliferating Walmarts and Aldis.
Dueling concepts of competition
Fundamental disagreements define the case: regulators contend they must preserve competition among traditional grocery stores because they offer a unique consumer benefits, primarily a selection of tens of thousands of items under one roof. That’s a problem for Kroger and Albertsons who want to join because while there are retailers that are larger grocers, they are the No. 1 and No. 2 “one-stop shop” supermarkets, according to regulators’ vision of their industry.
Kroger and Albertsons contend their industry has changed and continues to do so and that regulators should consider any retailer selling food a grocery competitor. Such a viewpoint also makes it much easier to justify the transaction, which would give the combined companies nearly as large a grocery business as the largest grocer in the world: Walmart, which sold $264 billion in food in the U.S. alone last year.
While regulators consider supercenters like Walmart and Target as comparable, they don’t consider such food-selling retailers, such as Costco, Aldi, Trader Joe’s or Dollar General as comparable peers, largely due to their much smaller selections.
Besides the irreconcilable views on peer groups, both sides sharply differ on how to evaluate local markets to determine if the merger would give the merged company too big a share of local sales. The debates over defining local markets resemble lawmakers attempting to re-draw legislative districts.