Grocery Store Mega-Merger Will Drive CA Food Prices Up: Feds

CALIFORNIA — The Federal Trade Commission on Monday sued to block the merger of two giant supermarket chains — Kroger and Albertsons Companies Inc.

California joined the effort. Attorney General Rob Bonta announced his office is part of the suit that also joins attorneys general from Arizona, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming, and the District of Columbia.

Speaking at a Los Angeles press conference Monday, Bonta alleges Kroger’s $24.6 billion purchase of Albertsons will create a monopoly that hurts Golden State consumers, workers and agricultural producers.

The deal would be especially painful in Southern California's highly concentrated retail grocery industry, according to Bonta: It gives consumers fewer choices and higher prices, and reduces unions' ability to negotiate working conditions at stores, impacting thousands of employees, he said.

Calling the deal a "mega-merger," Bonta claims the acquisition would leave some Southern California communities with only Kroger-Albertsons as supermarket options.

Cincinnati-based Kroger and Boise-based Albertsons employ more than 700,000 workers nationwide, and the two companies operate thousands of retail stores. By far, California has more stores than any other state, with Kroger operating about 233 as Ralphs, Food4Less, Foods Co. and QFC. Albertsons operates approximately 579 stores as Albertsons, Safeway, Vons and Pavilions.

"This merger will leave Californians with limited choices over where to shop — and for workers in this industry, where to work. As many families continue to feel the burden of inflation, fighting corporate consolidation that threatens to increase prices and reduce service is more important than ever," Bonta said.

In response to the lawsuit, an Albertsons spokesperson wrote via email that blocking the merger will give mega-retailers like Amazon and Walmart an advantage in the grocery industry.

"Albertsons Cos. merging with Kroger will expand competition, lower prices, increase associate wages, protect union jobs, and enhance customers’ shopping experience. 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.

"In contrast, Albertsons Cos.’ merger with Kroger will ensure our neighborhood supermarkets can better compete with these mega-retailers, all while benefitting our customers, associates, and communities. We are disappointed that the FTC continues to use the same outdated view of the U.S. grocery industry it used 20 years ago, and we look forward to presenting our arguments in Court," according to the statement.

Nationwide, Walmart/Sam's Club has a 29% share in the grocery industry compared to Kroger-Albertsons' 16%, according to the Albertsons spokesperson.

Kroger released a statement Monday, claiming the merger benefits consumers and workers.

"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," the Kroger statement reads.

The grocer claims cost-savings would stem from the merger, and that money will be invested as part of a business model aimed at lowering food prices for customers.

"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," according to Kroger.

Like Albertsons, Kroger sounded the alarm about big retailers competing in the grocery space.

The deal "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," the Kroger statement read.

When the proposed merger was announced in October, California balked. The United Food and Commercial Workers Western States Council represents the grocery store workers. It claims a merger would result in an estimated 5,750 jobs lost in the Los Angeles region alone. Read more: Albertsons Merger Threatens 5,750 SoCal Jobs; Newsom Kills Layoff Bill

Henry Liu, director of the FTC’s Bureau of Competition, said Monday that grocery store workers will suffer under the deal, even if they get to keep their jobs. He said the acquisition leaves them facing the threat of dwindling wages, diminished benefits and poor working conditions.

Consumers already stressed over food costs will feel pain under the deal, too, according to Liu.

"This supermarket mega-merger comes as American consumers have seen the cost of groceries rise steadily over the past few years," he said. "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."

Kroger operates stores across 36 states, which includes regional banners such as Fred Meyer, Fry’s, Harris Teeter, King Soopers, Kroger, and Quality Food Centers (QFC). Albertsons also operates thousands of stores across 35 states under regional names including Albertsons, Haggen, Jewel-Osco, Pavilions, Safeway, and Vons.

If the merger is completed, Kroger and Albertsons will not only operate more than 5,000 stores nationwide but also approximately 4,000 retail pharmacies, according to the FTC.