Saturday, July 20

FTC sues to block $24.6 billion Kroger-Albertsons grocery merger

FTC sues to block .6 billion Kroger-Albertsons grocery merger

The Federal Trade Commission and several state attorneys general filed a lawsuit Monday to block Kroger, the supermarket giant, from completing its $24.6 billion acquisition of the Albertsons grocery chain, saying the agreement would harm competition in the sector.

The agency said the deal, which would constitute the largest supermarket merger in U.S. history, would most likely result in higher grocery prices for consumers and, with fewer supermarkets, reduce the ability of grocery store employees to negotiate higher wages and better working conditions. .

“This supermarket mega-merger comes as U.S. consumers have seen the cost of groceries rise steadily over the past several years,” Henry Liu, director of the FTC’s Bureau of Competition, said in a statement from press. “Kroger’s acquisition of Albertsons would result in additional price increases for everyday groceries, exacerbating the financial pressure consumers across the country face today.”

The FTC’s federal lawsuit was joined by the attorneys general of Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming and the District of Columbia .

The lawsuit is the latest move by the Biden administration to take a tougher stance on mergers. In recent years, he has challenged several high-profile deals, including drugmaker Amgen’s acquisition of pharmaceutical company Horizon Therapeutics for $27.8 billion; JetBlue’s proposed $3.8 billion purchase of Spirit Airlines; and Microsoft’s acquisition of video game maker Activision Blizzard for $70 billion.

But in many cases, the FTC has lost in court, including in its attempt to block the Microsoft merger. (The regulator appealed Microsoft’s decision.) Kroger said in a statement that the FTC’s decision to block the merger would actually harm grocery store shoppers and employees.

“The FTC’s decision makes it more likely that American 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,” the company said.

Albertsons echoed those sentiments in a statement of its own. He added that if the FTC were successful in blocking the merger, “it would hurt customers and help strengthen large, multi-channel retailers like Amazon, Walmart and Costco – the very companies the FTC claims to control – by allowing them to continue to increase their sales. growing dominance of the grocery industry.

Both chains said they looked forward to arguing their case for the merger in court.

In the 16 months since Kroger announced its intention to acquire Albertsons, the proposed merger has faced opposition. Executives of the supermarket giants – two of the largest grocery chains in the United States – argued that the merger was necessary for them to compete with big retailers like Walmart, Costco and Amazon. These retailers, executives explained, use their size to negotiate better prices with manufacturers and suppliers, allowing them to sell cereal, yogurt, pasta and other staples to consumers at lower prices. .

But a chorus of critics, including consumer advocates, politicians, unions and independent grocery chains, said the merger of Kroger and Albertsons would create a powerful giant with sales of more than 200 billion dollars and approximately 5,000 stores in 48 states and the District of Columbia. The channels overlap significantly in some markets, such as Chicago, Dallas, Los Angeles and Seattle.

Cincinnati-based Kroger operates 2,750 grocery stores across the United States under banners including Ralphs, Dillons and Harris Teeter. Albertsons, based in Boise, Idaho, operates 2,200 supermarkets under names like Albertsons, Safeway and Vons.

Jon Donenberg, deputy director of President Biden’s National Economic Council, said in a statement that Mr. Biden believes competition is the key to capitalism. “When large companies are not controlled by healthy competition, they too often do not pass on cost savings to consumers and exploit their workers,” he said.

As inflation continues to drive up food prices, critics said, the proposed merger would give shoppers in some areas little or no choice about where to buy basic necessities. Others warned that with less competition, the merger would lead to higher food prices and possible layoffs.

“This decision shows that the FTC understands how the outsized power of big retailers harms the entire food system,” said Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance, a nonprofit organization. non-profit that defends independent businesses. “These two giants have already exercised their power as dominant buyers of food and goods by intimidating suppliers into giving them discounts and perks that they do not offer to smaller food retailers.”

Marc Perrone, president of the United Food and Commercial Workers International Union, said the guild will continue to oppose any merger that would negatively impact our hundreds of thousands of hardworking members at Kroger and Albertsons .

Kroger later said in a statement that it would invest $1 billion to increase wages and benefits and was committed to ensuring there would be no layoffs or store closings related to fusion.

In an effort to alleviate some of the concerns about the merger, Kroger and Albertsons plans announced in September to sell 413 stores across the country to C&S Wholesale Grocers for $1.9 billion. The sale is conditional on approval of the Kroger-Albertsons merger.

But the FTC said the proposed division created a hodgepodge of unconnected stores and brands that had been cobbled together and fell far short of creating a standalone company capable of competing with the Kroger-Albertsons combination.

The FTC also argued that quality would likely decline at a merged supermarket giant. Currently, the two stores compete by offering fresher products, flexible store and pharmacy hours, and curbside pickup services. If they merge, the incentive to compete by improving product quality and customer service would diminish, the FTC said.

Critics also described the proposed merger as a big payday for Albertsons’ private equity owners. Early last year, after surviving a legal challenge brought by the Washington state attorney general, Albertsons paid a $4 billion special dividend to its shareholders. The primary beneficiaries of this dividend, funded by a combination of cash and debt added to Albertsons’ balance sheet, were Albertsons’ private equity owners, including Cerberus, which at the time owned 73% of the company .