Why federal regulators want to stop grocery giants Kroger and Albertsons from merging

What could be the largest grocery store merger in U.S. history is at a do-or-die point, with closing arguments this week in a lawsuit filed by the FTC to stop Kroger’s nearly $25 billion purchase of Albertsons. The companies say the merger would lower prices, but regulators argue it would eliminate competition. Washington Post retail reporter Jaclyn Peiser joins Lisa Desjardins to discuss.

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  • Lisa Desjardins:

    What could be the largest grocery store merger in U.S. history is at a do or die point with closing arguments this week in a hearing over whether the deal could harm consumers and raise prices by blocking competition.

    Kroger's nearly $25 billion purchase of Albertsons would bring together a number of well-known grocery chains under one company, chains like Safeway, Harris Teeter, Ralphs and Smiths.

    Earlier this year, the Federal Trade Commission filed a lawsuit to stop the deal, arguing it would eliminate competition. The companies say the merger would actually lower prices, allowing them to compete with industry titans like Walmart, Target, Amazon and Costco.

    All this as both 2024 presidential campaigns focus their attention on finding ways to lower food prices that have shot up nearly 30 percent since 2019. Jaclyn Peiser is the retail reporter at The Washington Post.

    Jaclyn give us some context, where are Kroger and Albertsons, these companies, on the list of grocery chains in this country, and how much space do they occupy?

  • Jaclyn Peiser, The Washington Post:

    Yeah, so Kroger is the number two in sales for groceries across the country, and Albertsons is about number four, tied with Amazon, which includes Whole Foods. So there are two of the largest grocery chains throughout the entire country, and then combining together would make them still number two, and still a bit less than Walmart and sales, but they'd still be a pretty big behemoth when it comes to traditional supermarkets.

  • Lisa Desjardins:

    These are already heavyweight companies. Why do they say that they need to merge to stay profitable?

  • Jaclyn Peiser:

    For them they see Walmart, they see a lot of other grocery chains that are coming throughout the country. We have Aldi and Lidl, which are very specific kind of grocery shop, but they're certainly expanding. There's online groceries, there's clubs like Costco and Sam's and so for them, they're saying, you know, we need to combine forces to better compete with these other grocery chains.

  • Lisa Desjardins:

    Why is the FTC taking them on? What's their argument?

  • Jaclyn Peiser:

    They're saying that it would eliminate competition. And their definition of a supermarket is very specific, and it only really includes these major chains. They're not counting Costco. They're not really counting Walmart or Amazon. So in their perspective, they're saying by eliminating this competition, it will disincentivize them to lower prices.

  • Lisa Desjardins:

    And I guess that's one of the questions here, like, how does the FTC define a supermarket.

  • Jaclyn Peiser:

    Yeah, it's complicated, but for them, they look at it as a one stop shop kind of shopping experience. So you go to a safe way, and you can go to get a cake for your son's birthday, you can get your medications, you can go to the deli counter, and you can do all in one but then, you know, you look at a Costco, and that's a club membership you have to pay to go in.

    So they're saying that this is a very unique shopping experience that doesn't really compete in that sense, with, say, you know, $1 store, or, you know, a legal.

  • Lisa Desjardins:

    As I said, that is in dispute from the companies. But this also brings us to the big topic of grocery prices themselves. What's your reporting on what this merger could mean for grocery prices?

  • Jaclyn Peiser:

    It depends on who you ask. So Kroger and Albertsons are saying, when we combine, we will be lowering grocery prices from day one they investing a billion dollars into lowering the price of food. But the FTC is saying, well, not necessarily. They're combining forces. They don't have much competition, so why would they want to lower prices?

    But Kroger and Albertsons are saying, well, we need to be able to compete with WalMart. We need to be able to compete with Costco. And so the only way we can do that is by coming together, having more leverage over our suppliers, being able to have more efficient, you know, production, supply chain, all of that.

  • Lisa Desjardins:

    Some people who, reporters and others like yourself are asking, are the workers? Because we certainly know that they would be affected. I hear that idea of more efficient management, as they're saying often that means cutting jobs. I want to play in the words of grocery store worker, mom of two, who is now thinking about a former merger that she participated in when she was with Albertsons.

    Grace Garcia, Union Member, United Food and Commercial Worker 770: One minute you you have this job security that you've had for 24 years, and now you're needing to pivot to, what am I going to do next? And how am I going to make money? And how am I going to support my family? How am I going to pay rent?

    I mean, initially, when I started in the industry, there was multiple grocery stores. There was Hughes, Vons, Albertsons, Ralphs, Safeway, all in Southern California. Now we're down to two companies.

  • Lisa Desjardins:

    And we received a statement from union representing grocery store workers, the UFCW, opposing the merger. How did the companies respond when workers say we're nervous. This means our jobs, our livelihoods and our community on the line.

  • Jaclyn Peiser:

    Kroger likes to say they're one of the only union shops that are left in grocery and they said they've agreed to the collective bargaining agreements that they are really good for unions, that, you know, those agreements are going to continue after the merger happens. But the workers are concerned. They're saying, you know, having these two companies go up against each other is a really good way for them to get a better bargaining agreement so they can threaten strikes. They can, you know, look at this, the opposites across the street and say, Hey, these guys got a great deal. We're the Kroger over here. We want an equally good deal and not having that leverage anymore.

    Could, you know, negatively affect them getting a better a better deal, better wages. But Kroger is saying, you know, we're investing $1.3 billion in better wages, better benefits. So both sides have different have different views on it.

  • Lisa Desjardins:

    The decision here will be made by a judge. This is really a preliminary injunction. But why is it the case that the companies say that this decision actually could seal their face.

  • Jaclyn Peiser:

    Yeah. So the Kroger attorney, during his opening argument said to the judge, if you allow this injunction, then we are done. Merger is done. They announced this merger in 2022 so it's been a long time. So for them, you know, time is running out.

  • Lisa Desjardins:

    They're not going to spend more time.

  • Jaclyn Peiser:

    No, no, yeah.

  • Lisa Desjardins:

    Jaclyn Peiser from the Washington Post, thank you so much.

  • Jaclyn Peiser:

    Thank you.

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