Kroger and Albertsons go to Washington

A U.S. Senate Judiciary subcommittee will hold a hearing Tuesday at 3 pm ET on the competitive impact of the proposed merger of Kroger and Albertsons, featuring both grocery chains' CEOs.

Why it matters: While hearings can often be more about optics and politics, it's an opportunity for Kroger and Albertsons to pitch their deal directly to consumers.

• The risk is if they stumble on answering questions such as how the deal will affect pricing during a time of inflation.
• The Federal Trade Commission, which is already holding preliminary discussions with the companies, will be paying close attention.

The intrigue: Preceding the hearing, six local UFCW unions representing more than 100,000 Kroger and Albertsons workers will hold a press conference on the negative impact of the deal.

Between the lines: It's unlikely we'll learn much new about the deal during today's hearing, says a source familiar with the situation.

• The idea for Kroger and Albertsons is to demonstrate what the merger looks like to consumers, to talk about it in a more "personal way," and what it does for the nature of competition, the source says.
• It's unlikely the food retailers will make any pledges when it comes to prices, though they will likely talk more about their commitments on jobs and wages.
• Kroger and Albertsons will probably also discuss how the food retail landscape has changed in recent years, pointing to new entrants, e-commerce and private label, for example.

Of note: Kroger will also likely cite its own history of making acquisitions, and how that subsequently impacted gross margin and therefore food prices.

• "I think they’re hoping not to stumble and to get their story out," the source explains. "It's not lost on them that the FTC will be paying attention to this."

Meanwhile, Kroger and Albertsons feel more confident about their divestiture strategy due to inbound buyer interest from independent private grocery chains, the source says.

What's next: There will be a hearing on Dec. 9 in Washington's state court on whether to allow Albertsons' $4 billion dividend to proceed.

• While Albertsons has said that the dividend is separate from the merger, the language in the deal announcement connects the two.

Yes, but: Washington state's attorney general has an "uphill" fight (in the words of the court's judge) to stop the payout given that he has to prove that the dividend puts Albertsons' viability as a standalone company at risk.

The bottom line: The fate of Kroger-Albertsons will be determined by regulators, not legislators. But the hearing will help set the stage for those future deliberations.