The Federal Trade Commission and attorneys general in eight states, including California, Arizona and Wyoming, as well as the District of Columbia, filed a lawsuit to block the $24.6 billion tie-up between grocery store chains Kroger and Albertsons, the agency said on Monday.
In a complaint filed in U.S. District Court in Oregon, the FTC and states said the deal will raise prices, lower quality, limit choices for shoppers and harm the companies’ workers. They added that a plan by the two grocery giants to sell more than 400 stores to C&S Wholesale Grocers, a move to make the deal more palatable to antitrust regulators, is inadequate to remedy their concerns, according to the lawsuit.
The Biden administration has made confronting corporate power a key part of its domestic economic policy, particularly around kitchen table issues including food, health care and fuel costs. The FTC led by Chair Lina Khan along with her counterparts at the Justice Department’s antitrust division are leading the charge.
A copy of the complaint is not yet publicly available, pending redactions. In a statement the FTC said the deal would lead to higher prices for a host of consumer staples and services including fresh produce and pharmacy services. It also said the deal would lead to fewer jobs and depressed wages for workers. Both the International Brotherhood of Teamsters and United Food and Commercial Workers, labor unions representing grocery workers, have opposed the deal.
The deal would also give Albertsons and Kroger “increased leverage over workers and their unions—to the detriment of workers,” the FTC said, potentially leading to lower wages, fewer benefits and subpar working conditions.
“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, the FTC’s director of the Bureau of Competition said in a statement. Furthermore, “essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating.”
"Contrary to the FTC’s statements, blocking Kroger’s merger with Albertsons Companies will actually harm the very people the FTC purports to serve: America’s consumers and workers," said Kroger spokesperson Erin Rolfes. "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," Rolfes said.
“Albertsons Cos. merging with Kroger will expand competition, lower prices, increase associate wages, protect union jobs, and enhance customers’ shopping experience," an Albertsons spokesperson said in a statement. "If the Federal Trade Commission is successful in blocking this merger, it would be hurting customers and helping strengthen larger, multi-channel retailers such as Amazon, Walmart and Costco — the very companies the FTC claims to be reining in — by allowing them to continue increasing their growing dominance of the grocery industry."
A spokesperson for C&S did not immediately respond for comment. Spokespeople for Amazon, Walmart and Costco did not immediately respond to requests for comment.
The companies are already facing state court lawsuits filed by the attorneys general in Washington and Colorado, and met with the three FTC commissioners last week in an unsuccessful final bid to avoid a lawsuit.
Announced in the fall of 2022, the deal would be the largest grocery store merger ever. It would bring together the nation’s two largest traditional grocery retailers, creating a combined company with more than 5,000 stores, in 48 states, with household names like Safeway, Harris Teeter and Ralphs. The combined company would also operate some 4,000 pharmacies and employ nearly 7,000 workers, according to the FTC.
The controversial deal would create a dominant national grocery chain, reducing competition at a time when food inflation is already high, critics say. Antimonopoly groups and labor unions have also warned that the merger could further consolidate pharmacies, driving up prices for prescription drugs as well as lead to wage declines. Democratic members of Congress have urged the FTC to block the deal, and hauled the companies’ CEOs in to testify before a Senate committee in November 2022.
The companies have argued that it allows them to offer a wider variety of products at better prices. Kroger, Albertsons and C&S have pledged not to close stores and to honor existing union agreements. Rolfes, the Kroger spokesperson, said blocking the deal "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."
But Colorado and Washington questioned those commitments in their lawsuits, saying C&S was hesitant to commit to not close stores and also that Kroger and Albertsons had agreements to not hire each others’ workers during a 2022 strike.
In expressing skepticism on the divestiture of hundreds of stores, the FTC and states say a bulked up C&S would be unable to compete against a combined Albertsons and Kroger. In their state the FTC says the plan would create 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.”
Critics of the deal have also pointed to the failure of a similar plan in the 2015 merger between Albertsons and Safeway. The buyer of those divested stores quickly failed, and Albertsons bought back some of the stores it initially sold to appease the FTC.
Nick Niedzwiadek contributed to this report.
