FTC, 9 states sue to block Kroger-Albertsons merger

WASHINGTON (CN) — Federal regulators are suing to block the $24.6 billion merger of supermarket giants Kroger Co. and Albertsons Cos. Inc.

The Federal Trade Commission announced Monday it is filing suit in the U.S. District Court for the District of Oregon, arguing the merger will create higher prices for consumers, lower quality and narrow shoppers’ choices.

“This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years,” 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.”

Kroger, which in 2022 operated 2,719 stores across 36 states, owns regional banners such as Fred Meyer, Fry’s, Harris Teeter, King Soopers and Quality Food Centers. Its stores generated $148 billion in revenue in 2022 with an operating profit of $4.1 billion. 

Albertsons operated 2,271 grocery stores in 35 states and owns regional chains like Haggen, Jewel-Osco, Pavilions, Safeway and Vons. In 2022, its stores generated $77.6 billion in revenue, with an operating profit of $2.3 billion.

If the merger was completed, federal regulators said the combined company would operate more than 5,000 stores and 4,000 pharmacies across 48 states with more than 700,000 employees.

Kroger announced plans to acquire Albertsons in October 2022, but the move was quickly denounced by state attorneys general, with Colorado and the state of Washington already filing lawsuits to block the deal. Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming and Washington, D.C., are joining the FTC’s federal lawsuit.

In announcing the merger, Kroger and Albertsons said it was necessary to compete with Amazon and Walmart. At the time, Kroger controlled 6.7% of the grocery market and Albertsons controlled 4%. The combined company would create the second-largest grocery retailer behind Walmart, pushing Costco to third place.

In a statement Monday, Kroger said the merger would allow it to further invest in lowering prices for 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,” the company said. “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.”

In a bid to secure federal antitrust approval, the companies in September announced plans to sell more than 400 stores and a handful of brands to New Hampshire-based C&S Wholesale Grocers for $1.9 billion. C&S runs Grand Union and Piggly Wiggly stores.

Federal regulators said Monday, however, that the divestment wasn’t enough and “is a hodgepodge of unconnected stores, banners, brands, and other assets that Kroger’s antitrust lawyers have cobbled together and falls far short of mitigating the lost competition between Kroger and Albertsons.”

Stacy Mitchell, co-executive director at the Institute for Local Self-Reliance, applauded the FTC’s decision to block what “would have been a disaster for American communities.”

“This decision shows that the FTC understands how the outsized power of big retailers is damaging the entire food system,” Mitchell said in a statement. “Blocking this merger is a crucial step in restoring healthy competition to food retailing.”

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