Kroger and Albertsons Face a Skeptical F.T.C. in federal court
A trial that could determine whether the two largest supermarket chains in the United States can merge opened in Portland, Ore., on Monday, pitting the grocery giant Kroger against regulators who argue that its takeover of Albertsons would eliminate competition at the expense of consumers and workers.
Before Judge Adrienne Nelson of U.S. District Court, the Federal Trade Commission and the supermarket chains laid out their arguments in court for the first time, as union representatives and workers protested the deal on the courthouse steps. Less competition, the agency’s lawyers said, would give Kroger more leverage to raise prices on millions of consumers.
The highly anticipated proceedings, set to last three weeks, come as high food prices have become a critical focus in the presidential race. Vice President Kamala Harris has backed a ban on price gouging in the grocery and food industries to combat high grocery prices. But the F.T.C. The F.T.C., in its opening statement, stated that the deal would “eliminate the competition that shoppers, workers, and politicians depend on all at once.” This lawsuit is part a larger effort to help Americans feed their families. Attorneys general from eight states, including California, Illinois, and the District of Columbia, have joined the case. It’s part of a regulatory push under the Biden administration to rein in corporate consolidation in an array of industries, including airlines, Big Tech, book publishing and pharmaceuticals.
The grocery industry has seen waves of consolidation since the 1990s, and the landscape is now dominated by four players: Walmart, Kroger, Costco and Albertsons. If allowed to merge, Kroger and Albertsons could account for about 13 percent of U.S. groceries sales. The F.T.C. filed its antitrust suit in February, roughly a year after the grocery giants had announced their merger. The hearing in federal court concerns a preliminary order. If Judge Nelson rules for the F.T.C., the merger will be blocked until the F.T.C. has completed its separate internal proceeding on the deal before an administrative law court. Kroger sued F.T.C. Last week, Kroger sued the F.T.C. for calling its judges unconstitutional to prevent the internal tribunal from moving forward. The hearing is being treated largely as a mini-trial on the merits.
The F.T.C. The F.T.C. argues that the merger will reduce price competition and increase costs for consumers. The union represents the majority of in-store employees at both companies. The union represents most in-store employees at both companies.
“This kind of power is a fundamental right for workers,” Ms. Cordova said.
The merger would create a $200 billion company, with about 5,000 stores in 48 states and the District of Columbia. Kroger, based out of Cincinnati, operates 2,800 stores in the United States, under banners such as Ralphs, Dillons, and Harris Teeter. Albertsons, which is based in Boise Idaho, operates more than 2,200 stores under the Safeway and Vons names. faces a critical legal hurdle in showing the merger would reduce competition: Its lawyers need to convince Judge Nelson that the traditional supermarket industry, specifically, is the appropriate scope of analysis for assessing harm to competition — and that competition in the grocery industry happens at the local level.
Matthew Wolf, a lawyer for Kroger, said in his opening statement that the broader landscape of retailers that have made inroads into selling groceries — including online retailers like Amazon and bulk retailers like Costco — should be included in the assessment, an approach that would make it easier for the companies to argue that the merger would not give them undue dominance.
Competition with these bigger players is at the heart of Kroger’s justification for the deal. Walmart alone is responsible for 22 percent of U.S. groceries sales. Lawyers for Kroger and Albertsons portrayed the deal as a lifeline for traditional supermarkets strained by the increasing dominance of nontraditional rivals.
“Supermarkets are losing this food fight” to Walmart, Costco and Amazon, Mr. Wolf said.
The merger would lead to lower prices for shoppers at Albertsons, where prices tend to be higher than at Kroger stores, Mr. Wolf said. Kroger has stated that it would lower grocery costs by $1 billion in the event of a merger. Kroger has taken measures to address regulators’ concerns over market concentration. The F.T.C. came out strongly against the proposal.
“Hundreds of markets are unremedied by the divestiture,” said Laura Hall, the F.T.C.’s senior trial counsel. “C&S is unlikely to be an effective competitor for a litany of reasons.”
Looming over the proposal is the failed outcome of a similar deal in 2015, when Albertsons sold dozens of stores to a third company in order to acquire its rival Safeway. That company, Haggen, ultimately went bankrupt, closing some stores and selling many back to Albertsons.
The F.T.C. The F.T.C. is expected to call experts to testify regarding store sales and competition in the grocery sector before the hearing concludes on September 13. Next week, the chief executives of Kroger and Albertsons will be taking the stand.
