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FTC, States Announce Bid to Block Kroger, Albertsons Merger

Kroger operates one Food 4 Less and three Ralphs markets in Pasadena. Albertsons operates 2 Vons stores in Pasadena.

Published on Monday, February 26, 2024 | 11:16 am
 

The Federal Trade Commission, in conjunction with California and seven other states, announced a lawsuit Monday challenging the proposed $24.6 billion merger of grocery giants Kroger and Albertsons.

Calfornia Attorney General Rob Bonta announced the state’s involvement in the litigation during a news conference in downtown Los Angeles, later issuing a statement calling the merger “bad for workers, for agricultural producers and for California communities.”

“In some markets in Southern California, Kroger-Albertsons is expected to be the only one-stop grocery option,” Bonta said. “Today, 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. This merger will leave Californians with limited choices over where to shop — and for workers in this industry, where to work. As many families continue to feel the burden of inflation, fighting corporate consolidation that threatens to increase prices and reduce service is more important than ever.”

The FTC is leading the litigation, joined by California, Arizona, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming, and the District of Columbia.

“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,” Henry Liu, director of the FTC’s Bureau of Competition, said 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.”

In a statement, however, Kroger said the merger would help consumers by lower prices, and the FTC’s action will ensure rising grocery costs.

“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,” according to Kroger. “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.

“The proposed merger with Albertsons Cos. will produce meaningful and measurable benefits for customers, associates and communities across the country. The combined company committed that no stores, distribution centers or manufacturing facilities will close as a result of the merger, including those divested to C&S Wholesale Grocers. Customers will benefit from lower prices and more choices following the merger close. The company committed to investing $500 million to begin lowering prices day one post-close, and an additional $1.3 billion to improve Albertsons Cos.’ stores.”

The proposed merger was announced in 2022, a deal that would consolidate ownership of Ralphs, Albertsons, Vons and other supermarket chains. When the deal was announced, Kroger officials said the combined new company would include nearly 5,000 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies and 2,015 fuel centers. More than 710,000 people work for the two companies.

Rodney McMullen, Kroger chairman and CEO, said in a statement in 2022 the deal would bring “superior value to customers, associates, communities and shareholders.”

“Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores,” McMullen said in a statement. “This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors.”

In its statement announcing the deal, Kroger officials said the combined company anticipates divesting some stores. Those stores will be spun off into a new standalone company established by Albertsons named SpinCo, which is expected to include between 100 and 375 affected store locations.

The proposed merger has been strongly opposed by the United Food and Commercial Workers union, which said the proposal would create a monopoly that would hurt workers and raise prices for consumers.

UFCW officials issued a statement Monday praising the FTC’s action challenging the merger.

“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 with reduced food choices — all of this would have been destructive for workers, consumers, and entire communities,” according to the union. “Importantly, the FTC decision recognizes the threat that the merger would have caused goes beyond consumers and calls out that it would also have damaged essential grocery store workers’ wages, benefits and working conditions.”

A Kroger spokesperson responded to the UFCW statement by saying the only winners if the merger is blocked will be larger, non-unionized retailers who will continue to fight union growth.

“Kroger’s merger with Albertsons is inherently pro-union, and we have the track record to prove it,” the Kroger statement said.

“As union membership continues to decline nationwide, especially in the grocery industry, Kroger added more than 100,000 good-paying union jobs since 2012 and invested $1.9 billion to grow associate wages and industry-leading, comprehensive benefits since 2018. Kroger has committed to build on this work by investing $1 billion to raise associate wages and comprehensive benefits and ensuring zero layoffs or store closures related to the merger.  Additionally, Kroger, Albertsons and C&S have committed to honoring all current collective bargaining agreements.”

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