PORTLAND, Ore. (CN) — At the midpoint of a three-week hearing on the Federal Trade Commission's attempt to block a proposed merger between grocery store chain giants Kroger and Albertsons, both companies’ CEOs testified in an Oregon federal court on Wednesday.
Kroger CEO Rodney McMullen told the court that savings would be passed onto customers immediately after the companies merge if the $24.6 billion deal is allowed to proceed.
“The day that we merge is the day that we will begin lowering prices,” McMullen said during direct questioning.
The CEO said that Albertsons prices are, on average, between 10-12% higher than Kroger’s, and a merger would bring those prices down. McMullen also pointed to a $1 billion price investment to reduce prices at Albertsons, which he described as “not a hollow promise or empty gesture.”
The FTC filed suit in February in an effort to block the merger between the two companies, which was proposed in October 2022 when Kroger agreed to purchase Albertsons. Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming and Washington, D.C., all joined the FTC’s federal lawsuit against the proposed merger. Washington and Colorado also filed lawsuits to block the deal in state courts.
The commission argues that a merger would end competitive pricing between the stores, which overlap in 22 states. Part of the deal would also see a "divestment" sale of 579 Kroger and Albertsons stores to C&S Wholesale Grocers.
McMullen testified that the merger would give the companies a better shot at competing with the likes of Costco, Amazon and Walmart. He said that if Albertsons were to go out of business, there would be no change to Kroger’s prices.
Attorney Susan Musser, representing the commission, questioned McMullen about Kroger’s 2021 investor fact book, which identified Albertsons as a major competitor in multiple metropolitan areas.
Attorneys for Kroger pointed to Walmart as the store’s biggest competitor, which McMullen affirmed.
“Our best competitor we’re looking at for pricing is Walmart,” McMullen said.
Albertsons CEO Vivek Sankaram conceded that Kroger was among the company’s top competitors.
“Kroger is our competitor, but not our most important competitor,” Sankaram said. He said Walmart brings “unprecedented scale” to the market, and the companies could better compete if they merged.
Federal Trade Commission attorneys brought up a cost analysis used internally by Albertsons, which identified eight out of 12 divisions directly naming Kroger stores as price point comparisons.
He described the proposed merger as the “most consequential decision” of his career. He also said Albertsons might have to close stores and lay off employees if the deal is blocked and "cannot preclude anything."
The antitrust officials argued in opening arguments last Monday that unions would be negatively affected by a merger between the supermarket. Union negotiations at one grocery store can affect those at another store and provide bargaining leverage. McMullen told the court Kroger would honor all existing labor contracts. Combined, Kroger and Albertsons employ around 710,000 employees.
Kroger’s Chief Marketing Officer Stuart Aitken also testified that the merger would immediately lower prices and said Walmart has been the company’s main price competitor over the last two decades.
He was questioned about an email he sent to company leadership in 2021 that Kroger needed to “pass on as much inflation as the customer will let us.”
Aitken told the court it was because the company wasn’t keeping up with inflation.
If U.S. District Judge Adrienne Nelson agrees to issue the preliminary injunction, an in-house FTC administrative hearing is expected to begin Oct. 1.
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.
Additional Reads
-
Texas argues for fee placed on nude dancing venues before Fifth Circuit September 4, 2024 -
