News Alert: FTC Sues To Block $25 Billion Kroger-Albertsons Merger

As reported was likely late last week, the Federal Trade Commission (FTC) has sued to stop the proposed $25 billion merger of supermarket giants Kroger and Albertsons from proceeding, citing the potential of higher prices for consumers and lower wages for workers if the combination goes through. A bipartisan group of state attorneys general from Arizona, California, Washington D.C., Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming joined the suit, which aims to block the deal’s closure, pending the FTC’s administrative proceedings.

According to the FTC, the merger “would eliminate head-to-head price and quality competition, which have driven both supermarkets to lower their prices and improve their product and service offerings. If the merger takes place, grocery prices will increase, and Kroger and Albertsons’ incentive to improve product quality and customer service will decrease, further harming customers.”

Kroger and Albertsons agreed to divest several hundred stores to C&S Wholesale Grocers for $1.9 billion to alleviate competition concerns, but the FTC sees that step as inadequate. “Kroger and Albertsons’s inadequate divestiture proposal 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,” the agency stated.

Kroger and Albertsons have consistently maintained that the deal will result in lower prices and more choices for consumers, and said they’ll invest $500 million to lower prices post-merger. Both Kroger and Albertsons are major players in beverage alcohol across wide swaths of the country. Kroger carries some 4,000 unique spirits SKUs, with significant variance in selection from market to market, according to local laws. Albertsons sells spirits in 1,200 locations, wine in 1,800 locations, and beer in 2,000 locations—and where all three beverage alcohol types are sold, beverage alcohol comprises about 10% of total store sales.

“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. “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.”—Daniel Marsteller

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