The Federal Trade Commission and a coalition of states that includes California have filed a legal challenge to the proposed merger of Kroger Co. and Albertsons, arguing that the $24.6 billion deal would lead to price hikes in regions such as Southern California.
The lawsuit brought by the FTC, eight states and the District of Columbia was filed Feb. 26 in a federal district court in Oregon. The two companies oversee the two largest supermarket chains in the nation, according to California Attorney General Rob Bonta, and the merger would increase food prices nationwide.
“This megamerger is bad for workers, for agricultural producers and for California communities,” Bonta said in a prepared statement. “In some markets in Southern California, Kroger-Albertsons is expected to be the only one-stop grocery option. … We are going to bat for a more just and competitive economy, one where companies need to compete for labor and where prices and service matter.”
The result would be fewer shopping choices and higher prices for the concentrated grocery market in the southern part of the state, according to the state Attorney General’s Office.
“The merger is also expected to reduce the ability of unions to negotiate working conditions at these stores, impacting thousands of employees in California,” the office said in a news release.
Bonta's actions were cheered by left-wing activists, including environmentalist organization Food & Water Watch. An attorney for Food & Water Watch called the merger a "ploy" by corporations who hold a "stranglehold" on the U.S. food system. They, like Bonta, predicted the merger will result in higher prices.
Kroger rejects the allegations in the lawsuit, arguing that its business model will allow the post-merger company to invest money saved through business efficiencies to further lower the cost of food items.
“Kroger has reduced prices every year since 2003, resulting in $5 billion invested to lower prices and a 5% reduction in gross margin over this period,” the grocery retailer said in a statement. “This business model is immediately applied to merger companies. Kroger has a proven track record of lowering prices so more customers benefit from fresh, affordable food, and our proposed merger with Albertsons will mean even lower prices and more choices for America's consumers.”
A rejection of the merger would only strengthen non-union retailers such as Walmart, Costco and Amazon by allowing them to expand their grocery market share, the company said.
“As a combined company, Kroger committed to investing $1 billion to raise wages and comprehensive benefits,” Kroger said in its statement. “... As union membership continues to decline nationwide, especially in the grocery industry, this merger is the best way to secure union jobs.”
The lawsuit seeks a preliminary injunction to block the merger and alleges the deal would be a violation of the Clayton Act, a federal law that bars a purchase of assets when the effect will be a substantial decline in competition or the creation of a monopoly.
“The proposed acquisition also may substantially increase Kroger’s and Albertsons’ leverage in negotiating with workers, reducing wages, benefits, opportunities and the quality of workplace conditions and protections,” the lawsuit states.
The merger of the two grocery retailers would result in a company with 5,000 stores, 4,000 pharmacies and 700,000 workers in 48 states, according to the complaint, which labels the deal the largest supermarket merger in American history.