KROGER IN COURT: Are FTC’s Arguments Flawed?
The trial aiming to block the largest supermarket merger in U.S. history proceeded on Sept. 10 in a Portland, Ore., courtroom with a focus on competition, the divestiture package and labor.
The Kroger Co. and Albertsons Cos. announced a $24.6 billion merger in 2022, claiming the deal will better enable the companies to lower prices and better compete with global behemoths, like Walmart. However, the Federal Trade Commission (FTC) filed a lawsuit to block the deal in February, alleging this consolidation would eliminate competition in the grocery space.
Amid the trial, Kroger and Albertsons have pointed out the FTC is limiting its perception of grocery competition to “traditional supermarkets.” The landscape of grocery shopping has in fact expanded to a diverse assortment of grocery retailers, including club stores such as Costco and Sam’s Club, big-box retailers like Walmart and Target, hard discounters such as ALDI and Lidl and competitors like Amazon, which not only owns Whole Foods Market but also sells groceries through its e-commerce platforms. Kroger says the FTC is ignoring this rapidly evolving marketplace in which it and Albertsons operate.
But to help ease any of FTC’s competition concerns, Kroger and Albertsons have already agreed to divest 579 stores in a variety of geographic locations to C&S Wholesale Grocers. Susan Morris, the executive tapped to lead C&S’ new retail business, took the stand on Sept. 5 to discuss the divestiture package and efficiencies.
“I’m confident in our ability to run these stores,” she said. “I don’t want to run another mini-Kroger or a mini-Albertsons. This is a chance to run something distinct.” Morris is a long-time executive at Albertsons who currently serves as the company’s COO.
The divesture packaging also includes distribution and production facilities, exclusive rights to several private label brands and transitional support services, among other things.
Meanwhile, FTC is also arguing that the merger will decrease the bargaining leverage of unions. Kroger says that before this case, no plaintiff in history has sought to block a merger under the Clayton Act by alleging that it will decrease the bargaining leverage of unions. “For good reason,” according to the national grocer. “Text and precedent make clear that the antitrust laws have no place in the field of labor relations.”
From Kroger’s perspective, the wages and benefits of all labor competitors, including companies outside the grocery industry and companies that are non-union, are far more important data points than a single competitor, such as Albertsons, as the government has tried to argue.
One of the more surprising aspects of the landmark trial came on day 2 when Albertsons’ lawyers said if the merger doesn’t go through, the company will try to compete for the next two to four years but would need to fundamentally change its cost structure to operate on its own longer term – which could include layoffs, closures, a market exit or a sale to another competitor.
Opening statements of the trial started on Aug. 26 in a Portland, Ore., courtroom. U.S. District Judge Adrienne Nelson has confirmed that closing arguments in the case will now be heard on Tuesday, Sept. 17.
Cincinnati-based Kroger serves over 11 million customers daily through a digital shopping experience and retail food stores under a variety of banner names. The grocer is No. 4 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America. As of June 15, Albertsons Cos. operated 2,269 retail food and drug stores with 1,725 pharmacies, 403 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. The Boise, Idaho-based company operates stores under more than 20 banners. Albertsons is No. 9 on The PG 100. Keene, N.H.-based C&S is No. 18 on PG’s list.
