FTC sues to block Kroger-Albertson’s supermarket deal

The Federal Trade Commission filed a lawsuit Monday seeking to block Kroger, the supermarket giant, from completing its $24.6 billion acquisition of the Albertsons supermarket chain, saying the deal would harm competition in the industry.

The agency said the deal, which would be the largest supermarket merger in US history, would also likely result in higher grocery prices for consumers and, with fewer supermarkets, reduce the ability for supermarket workers to negotiate higher wages and better working conditions. .

“This mega-merger of supermarkets comes as American consumers have seen the cost of groceries steadily rise in recent years,” Henry Liu, director of the FTC’s Bureau of Competition, said in a press release. “Kroger’s acquisition of Albertsons would lead to additional grocery price increases for everyday goods, further exacerbating the financial pressures consumers across the country face today.”

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

But in many cases the FTC has lost in court, including in its attempt to block the Microsoft merger.

In the 16 months since Kroger announced plans to acquire Albertsons, the proposed merger has been met with opposition. Executives from the supermarket giants – two of the largest supermarket chains in the United States – argued that the merger was necessary to compete with major retailers such as Walmart, Costco and Amazon. These retailers, executives said, 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.

“Our merger with Albertsons will deliver meaningful, measurable benefits to American consumers, employees of both companies and the communities we serve,” Kroger said in a statement last year.

But a chorus of critics, including consumer advocates, politicians, labor unions and independent grocery chains, said the merger of Kroger and Albertsons would create a powerful giant with sales of more than $200 billion and about 5,000 stores, including recognized chains such as Ralphs, Safeway and Vons. .

As inflation continues to drive up food prices, critics say, the proposed merger would give shoppers in some regions little or no choice about where they can buy household staples. Others warned that with less competition, the merger would result in higher grocery prices and possible layoffs.

In an effort to address some of these concerns, Kroger and Albertsons have decided announced plans last September to sell 413 stores nationwide to C&S Wholesale Grocers for $1.9 billion. The sale is subject to approval of the merger between Kroger and Albertsons.

Critics also portrayed the proposed merger as a big payday for Albertsons’ private equity owners. Early last year, after surviving a legal challenge from the Washington attorney general, Albertson made a special $4 billion dividend payment to its shareholders. The biggest recipients of that dividend, which was funded by a combination of cash and debt added to Albertsons’ balance sheet, were Albertsons’ private equity owners, including Cerberus, which owned 73 percent of the company at the time.