Heritage Foundation public finance economist E.J. Antoni discusses the Kroger-Albertsons potential merger and the rulings impact on the U.S. economy.
The Federal Trade Commission (FTC) on Monday kicked off a trial amid its push to block Kroger’s $25 billion merger with Albertsons by alleging the deal would undermine competition in the grocery store industry and hurt consumers.
Kroger and Albertsons first announced the proposed merger in October 2022 and unveiled their divestiture plan in September 2023. The companies have agreed to sell nearly 600 locations to C&S Wholesale Grocers to help the deal pass regulatory muster. Kroger has also committed to lower grocery prices by $1 billion after the deal, which would be the largest merger in the history of the grocery industry, proceeds.
The FTC and several states filed lawsuits to block the merger, arguing that it would lead to higher grocery prices for consumers while reducing the bargaining power of unionized workers in the industry.
“Stopping this multibillion-dollar deal will keep in place the vigorous competition that acts as a check on rising grocery prices and spurs improvements in quality and innovation,” said FTC chief trial counsel Susan Musser in her opening statement on Monday.
KROGER-ALBERTSONS MERGER: IS IT GOOD OR BAD FOR SHOPPERS?
Kroger and Albertsons are defending their merger in the trial after the FTC and several states sued to block it. (Shelby Tauber/Bloomberg via / Getty Images)
Kroger attorney Matthew Wolf said in his opening statement that the merger would immediately lower some prices for shoppers at Albertsons, where prices are 10-12% higher than at Kroger stores.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| ACI | ALBERTSONS COMPANIES | 20.84 | -0.09 | -0.43% |
| KR | THE KROGER CO. | 52.77 | +0.82 | +1.58% |
He said the FTC’s effort to block the deal shows “they neither understand the industry nor the parties within it,” and added that the merger would help the stores compete with rivals like Walmart – the largest grocery retailer in the U.S. – as well as Costco and Amazon-owned Whole Foods.
ALBERTSONS AND KROGER AGREE TO PAUSE MERGER AMID LEGAL, REGULATORY CHALLENGES
Albertsons and Kroger agreed to the $25 billion merger last year. (Ethan Miller / Getty Images)
The FTC’s suit represents a high-profile component of the Biden-Harris administration’s efforts to lower prices for consumers, as well as FTC Chair Lina Khan’s efforts to use antitrust law as a means of boosting wages and mobility for workers.
U.S. District Judge Adrienne Nelson is presiding over the case in Portland, Oregon, and she is considering whether the deal should be paused while the FTC’s in-house judge examines how the merger would impact competition.
KROGER, ALBERTSONS IDENTIFY NEARLY 600 LOCATIONS THEY WILL SELL TO GET MERGER APPROVED
FTC Chair Lina Khan has sought to use antitrust law to strengthen the bargaining power of labor. (Drew Angerer / Getty Images)
The trial is expected to last about three weeks and will feature evidence about competition in the grocery industry, as well as the ability of C&S Wholesale Grocers to successfully run the 579 divested stores it would acquire if the Kroger-Albertsons merger proceeds.
Other challenges filed by the states of Colorado and Washington are scheduled to go to trial after the FTC’s case, which was joined by Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming and the District of Columbia.
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Reuters contributed to this report.