Biggest US supermarket chains want to merge. Why feds’ challenge could benefit you

The two largest supermarket chains in the United States want to merge. But the Federal Trade Commission says that would have dire effects on consumers and workers.

The FTC sued to block the merger — “the largest proposed supermarket merger in U.S. history” — on Feb. 26, according to a news release and lawsuit. The challenge comes after the companies’ 2022 announcement that Kroger Company would acquire Albertsons Companies, Inc. for $24.6 billion.

“The stakes for Americans are exceptionally high,” officials said in the suit.

But Kroger disagrees, arguing in a Feb. 26 news release that blocking the merger “will actually harm the very people the FTC purports to serve: America’s consumers and workers.”.

The company said it takes costs out of its business and then invests that money into lowering prices for consumers, noting that it has lowered prices “every year since 2003.”

As of 2022, Kroger operated more than 2,700 supermarkets and 2,200 retail pharmacies in 36 states, including banners such as Kroger, Harris Teeter, Fred Meyer and Quality Food Center (QFC), the suit said. At the same time, Albertsons operated more than 2,200 supermarkets and more than 1,700 retail pharmacies in 35 states, including banners such as Albertsons, Safeway, Vons and Tom Thumb.

If they were to merge, the two would operate more than 5,000 stores and about 4,000 retail pharmacies, employing nearly 700,000 workers across 48 states, officials said.

Here’s why the FTC’s challenge could benefit consumers and workers — and how the merger could create issues.

No merger means better prices and better service

If Kroger buys Albertsons, head-to-head competition among supermarkets would be greatly reduced — and consumers would be left to “foot the bill,” according to the FTC.

“This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years,” Henry Liu, director of the FTC’s bureau of competition, said in the release. “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.”

As separate operators, Kroger and Albertsons engage in “aggressive” competition to lure customers, the suit said. For example, the companies “frequently price check each other at a local level and often alter pricing in response to competition from each other.”

This competition also leads to “promotional pricing discounts on products.” Both Kroger and Albertsons “engineer their promotional programs and discounts in part to drive customers towards their own supermarkets.”

Without this competition, consumers will see prices rise, promotions disappear and service standards diminish at supermarkets and retail pharmacies, the FTC argued.

“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,” officials said.

The challenge could save employee wages and benefits

Officials argued the merger would also harm employees — leading to lower wages, worse benefits and less competition for union labor.

“Today, Kroger and Albertsons compete aggressively with one another to hire and retain grocery workers, principally through collective bargaining negotiations with local unions,” the FTC said in its suit. “This competition has resulted in higher wages, better benefits, and improved working conditions for employees.”

By merging, the companies would effectively eliminate their need to compete for employees, “threatening the ability of hundreds of thousands of grocery store workers to secure stronger contracts with improved wages and benefits.”

Workers have expressed similar worries.

“Competition makes companies work harder to earn our loyalty. ... If workers aren’t satisfied with how our employer treats us, we have the freedom to go work at the other employer to apply our skills in the same industry,” two employees working at stores owned by Kroger or Albertsons wrote in an opinion piece in The News Tribune.

“Here’s the bottom line: We are extremely bothered and fearful of the harm for coworkers, our stores, our customers and our communities if this mega-merger is allowed to proceed,” the employees said.

By challenging the merger, the FTC said it’s sparing tens of thousands of workers from harm.

Executives say the merger would benefit consumers, employees

Both Kroger and Albertsons argued their merger is necessary to compete with “larger, multi-channel retailers such as Amazon, Walmart and Costco,” which “continue increasing their growing dominance of the grocery industry,” according to an Albertsons Cos. spokesperson.

“In contrast, Albertsons Cos.’ merger with Kroger will ensure our neighborhood supermarkets can better compete with these mega retailers, all while benefiting our customers, associates, and communities,” the spokesperson said.

As a combined company, Kroger and Albertsons will also continue supporting employees, according to Kroger’s statement.

“Kroger committed to investing $1 billion to raise wages and comprehensive benefits. This builds on the incremental $1.9 billion Kroger invested to improve wages and comprehensive benefits since 2018,” the company said. “To provide the best holistic support for each associate, the company will also extend continuing education and financial literacy benefits to all associates following the merger close.”

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