Less than a week after the Colorado Attorney General filed suit to block a proposed merger between Kroger and Albertsons, the two largest supermarket chains in the country, the Federal Trade Commission has joined the party by filing a suit of its own.

Montrose’s two major supermarkets ­— City Market and Safeway — are owned by Kroger and Albertsons, respectively, meaning a potential merger could have major local implications.

The companies argue they need the merger to survive in today’s competitive grocery business (with competitors like Walmart), but the lawsuit filed by the Federal Trade Commission, argues the merger “will eliminate fierce competition between Kroger and Albertsons, leading to higher prices for groceries and other essential household items for millions of Americans.”

“This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years. 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. “Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating.”

A bipartisan group of nine attorneys general is joining the FTC’s complaint, including Colorado AG Phil Weiser.

Kroger and Albertsons operate thousands of stores in 36 states. If the merger were to go through, the supermarket giants wowuld operate more than 5,000 stores and approximately 4,000 pharmacies and would employ nearly 700,000 employees across 48 states, according to the FTC filing.

In part of the FTC’s statement to the press, released this week, the commission argued executives with both companies have conceded the deal creates a “monopoly”: “… executives for both supermarket chains have conceded that Kroger’s acquisition of Albertsons is anticompetitive, with one executive reacting candidly to the proposed deal: ‘you are basically creating a monopoly in grocery with the merger.’”
Kroger argues the FTC is wrong and that the merger will offer benefits to consumers.

“The FTC’s decision makes it more likely that America’s consumers will see higher food prices and fewer grocery stores at a time when communities across the country are already facing high inflation and food deserts,” Kroger said in a statement released in response to the FTC’s filing. “In fact, this decision only strengthens larger, non-unionized retailers like Walmart, Costco and Amazon by allowing them to further increase their overwhelming and growing dominance of the grocery industry.”

Since the two companies agreed to the merger in October 2022, Weiser, along with the UFCW, the union of Kroger and Albertsons workers, have been opposed to the deal.

UFCW has been vocal about their belief that the merger would result in closed stores and eliminated jobs, though Kroger has promised it would not close any stores as a result of the merger. The grocery giant has also promised to invest more into its Albertsons stores to bring them up to date. (The City Market and Safeway stores in Montrose are not unionized.)

“The FTC’s decision reflects clear concerns over the impact such a megamerger could have on workers, food prices, and millions of customers. As our delegates made clear last year at our International Convention, 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,” UFCW International President Marc Perrone said in a statement. “As this legal process now moves ahead, our focus will remain the same. The UFCW will continue to advocate for a stable and long-term solution that is in the best interest of our members and the customers and communities they serve. That means that any company who is looking to purchase stores must first and foremost honor our collective bargaining agreements and be committed to protecting these essential jobs now and in the years ahead.”

Divestiture of stores

As part of the merger, Kroger and Albertsons agreed to sell off 413 of their more-than-5,000 stores. That was agreed to in order to wane the FTC’s antitrust concerns. C&S, which owns several brands including Piggly Wiggly, would be the company to purchase those stores.
The FTC said in its most recent statement, however, that the efforts don’t go far enough.

“The FTC says the proposed divestitures are not a standalone business, and C&S would face significant obstacles stitching together the various parts and pieces from Kroger and Albertsons into a functioning business—let alone a successful competitor against a combined Kroger and Albertsons,” part of the statement reads. “The proposal completely ignores many affected regional and local markets where Kroger and Albertsons compete today.”

The FTC further argues there would be less incentive for Kroger and Albertsons to compete on quality, and there would be less incentive for them to pay their workers fair wages, if the merger were to be completed.

To read the whole suit, go here.

Justin Tubbs is the Montrose Business Times editor. He can be reached by email at justin@montrosebusinesstimes.com or by phone at 970-765-0915 or mobile at 254-246-2260.