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10/19/2022

Kroger/Albertsons Merger Set to Go Before U.S. Senate

A U.S. Senate subcommittee will examine proposed deal between the two grocery giants next month.
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Kroger store front

The U.S. Senate is ready to take a closer look at what many are calling the biggest grocery deal in decades. The Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights has plans to weigh how The Kroger Co.’s impending acquisition of Albertsons Cos. will affect consumers and competition within the industry.

U.S. Senators Amy Klobuchar (D-MN), chairwoman and ranking member of the subcomittee, and Mike Lee (R-UT), a ranking member, will hold a hearing next month to examine the proposed merger between Kroger and Albertsons.

“As the Chair and Ranking Member of the Subcommittee on Competition Policy, Antitrust, and Consumer Rights, we have serious concerns about the proposed transaction between Kroger and Albertsons,” the senators said in a statement. “The grocery industry is essential, and we must ensure that it remains competitive so that American families can afford to put food on the table. We will hold a hearing focused on this proposed merger and the consequences consumers may face if this deal moves forward.”

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Albertsons store

Kroger said it will acquire Albertsons for $34.10 a share, a total enterprise value of approximately $24.6 billion. Kroger CEO Rodney McMullen says a merger with the Albertsons Cos. creates a national supermarket footprint of nearly 5,000 stores reaching 85 million households in 48 states that allows the combined company to create an experience for customers and associates "unlike anything else."

Multiple senators signed a letter to Federal Trade Commission (FTC) Chair Lina Khan earlier this week to express concern over the proposed deal. Klobuchar, Richard Blumenthal (D-CT) and Cory Booker (D-NJ) asked Khan for assurance that the merger would be carefully and thoroughly investigated by the FTC.

“As food prices remain elevated, too many American families are struggling to put food on the table for their families,” the senators wrote. “These issues are worse for families in areas without access to affordable, nutritious food. And across the country, more than six million American children suffer from not having enough food.

“Against that backdrop, last week the nation’s two largest grocery chains, Kroger and Albertsons, announced a proposed $25 billion merger,” they continued. “This merger raises considerable antitrust concerns. The grocery industry is essential to daily life, and Americans need the benefits that robust competition brings, namely lower prices, higher quality, and innovation.”

According to Christine Bartholomew, professor of law at University of Buffalo in New York and expert on corporate monopolies, the merger is an important bellwether for how the FTC plans to act on its previous promise to be more pro-consumer and enact a stronger oversight posture.

Although Kroger said it plans to invest millions of dollars to lower prices for customers, the National Grocers Association and the United Food and Commercial Workers International Union have also expressed concerns about the merger.

"A merger of the nation’s top two grocery chains should raise serious questions about a single supermarket giant gaining unprecedented dominance over the nation’s food supply chain," said Greg Ferrara, NGA president and CEO. "A merger would not only put smaller competitors at an unfair disadvantage, but also increase anticompetitive buyer power over grocery suppliers, which ultimately would harm consumers."

Bartholomew believes the specific details of the deal will give a better sense of whether the promised price cuts for consumers will come to fruition.

“Most every merger includes promises of lower prices,” said Bartholomew. “But merging doesn't magically reduce costs — and not all cost reductions impact our pocketbooks. While merging may allow the grocery chains to reduce redundant overhead, it's not clear that those gains will be passed on to consumers. This is a particular concern when the second and third largest players in an industry are planning to merge.”