Kroger-Albertsons Merger ‘Would Not Be Counterbalanced’ by Competitors, DOJ Says

Fred Meyer, a Kroger store.

UFCW 555 rep says proposed merger ‘better than the alternative.’

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This week Oregon attorney general Ellen Rosenblum joined eight other states and the Federal Trade Commission in filing a lawsuit to prevent a proposed $24.6 billion merger between grocery giants Kroger and Albertsons. 

A statement from the attorney general’s office says the merger violated the Clayton Act, which prohibits acquisitions that might substantially decrease competition. In response to the lawsuit, the two companies released a joint statement claiming the merged entities would still face competition from Walmart, the nation’s largest grocery supplier.

According to an official statement by the FTC, eliminating competition between Albertsons and Kroger would lead to “higher prices for groceries and other essential household items for millions of Americans,” as well as lower product quality and reduced power for employees. “Kroger’s proposed acquisition of Albertsons would immediately erase aggressive competition for workers, threatening the ability of employees to secure higher wages, better benefits, and improved working conditions,” the statement read.

Roy Kaufmann, a spokesperson for the attorney general’s office, echoed the FTC’s sentiments, telling Oregon Business over email that his office’s investigation found compelling evidence that “direct, head-to-head competition between Kroger and Albertsons has forced the two chains to compete vigorously against one another — both on price and on the quality of goods and services offered at their stores.”  

He also said his office doesn’t buy the claim that other chains would provide sufficient competition should the merger go through.

“The effects of loss of competition between Kroger and Albertsons will be addressed in the litigation, but we believe the evidence will establish that it would not be counterbalanced by other potential competitors and that it would be harmful to consumers and workers,” Kaufmann wrote.

Kroger and Albertsons are among the nation’s largest grocery chains, operating 1,270 and 1,811 locations respectively.  But even combined, they are dwarfed by Walmart, which operates more than 4,600 locations in the United States, according to data extraction website ScrapeHero.

But in Oregon, Walmart’s footprint is small compared with that of the proposed grocery chain. Albertsons and Kroger operate a combined 176 stores in Oregon. Kroger operates 51 Fred Meyer and 4 QFC stores, while Albertsons operates 25 Albertsons locations and 96 Safeway locations, whose parent companies merged in 2015. Walmart operates 45 stores in Oregon.

As part of the merger plan, Kroger and Albertsons would  sell a combined 413 stores to C&S Wholesale Grocers, including 49 in Oregon, as part of a divestment plan to keep the market competitive. Critics have pointed to Albertsons’ failed divestment plan after its merger with Safeway. In 2015 the two companies sold a combined 146 stores to the Washington-based grocery chain as a condition of its merger; later that year it bought back 33 of those stores.

UFCW Local 555, which represents workers in both chains, has endorsed the merger, where the UFCW as a whole has been critical of the merger since plans were first announced in October 2022, This week several UFCW locals, not including 555, released a statement this week applauding the FTC’s suit.

Miles Eshaia, IT manager and communications specialist for the UFCW Local 555, tells Oregon Business the proposed merger beats other possible alternatives.

“Albertsons is owned by Cerberus Inc, and Cerberus Inc wants to sell Albertsons. When you operate under the assumption that it will be sold and the status quo is not an option, you go, ‘OK, it’s either going to be Kroger with a large divestment in C&S, but if not them, who?” Eshaia says. “It could go to a big box retailer, it could go to a company like Amazon, and that’s not good for workers or consumers. And so, when you look at it with that scope with all the pieces on the table, that’s kind of why we’re like going ‘Yeah, we should do this because the alternative is not great for anybody.’”