The U.S. Federal Trade Commission sued to block the USD 24.6 billion (EUR 22.7 billion) proposed Kroger-Albertsons merger on 26 February. The suit will almost certainly further delay the merger – originally proposed in October 2022.
In the FTC’s suit, the commission argued the tie-up would lead to “higher prices for groceries and other essential household items for millions of Americans.”
“The loss of competition will also lead to lower-quality products and services while narrowing consumers’ choices for where to shop for groceries,” the FTC said.
Policymakers throughout the country have voiced the same concerns.
If the deal were to go through, Cincinnati, Ohio, U.S.A.-based Kroger would acquire all of Boise, Idaho, U.S.A.-based Albertsons’ outstanding shares for around USD 24.6 billion (EUR 22.8 billion). Albertsons would also spin off a newly created standalone public company, SpinCo, and divest 413 stores to C&S Wholesale Grocers. Currently, Kroger operates more than 2,700 stores, while Albertsons owns nearly 2,300. With the acquisition, Kroger would nearly double its total number of locations, and together with Walmart, they would control about 55 percent of the food retail market in the U.S.
Kroger criticized FTC’s suit, contending the merger would actually result in lower consumer prices.
“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. In fact, this decision 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,” the retailer said.
Kroger also said that no stores, distribution centers, or manufacturing facilities would close as a result of the merger, including those divested to C&S Wholesale Grocers.
The merger might give the company the opportunity to lower costs, but that's not the most likely outcome, according to Rich Wolverton, the owner of retail and foodservice consulting firm Grow Foodservice.
"How often does that happen?” he told SeafoodSource. "History proves the FTC correct that less competition typically means higher prices to the consumer,” said Wolverton, who was an executive at Food Services when US Foods acquired the company in a merger in 2019.
Chuck Anderson, the vice president of operations and a partner at Certified Quality Foods, said the situation is a bit more nuanced. If the correct stores are divested, competition can be preserved, he said.
“When assessing the grocery competition landscape, does the FTC consider all the various competitors, not just traditional supermarkets? So many outlets are competitively offering groceries now, including Aldi, Lidl, Trader Joe’s, WalMart, and Meier,” Anderson said.
However, Anderson said if the right stores are not divested, competition will suffer, leading to fewer options and potentially higher prices.
“If approved, this and other regional and national supermarket mergers could put more pressure on independent grocers,” Anderson said.
Anderson said if the merger goes through, fresh, frozen, and shelf-stable seafood suppliers would ...
