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BFD Expert Voices - Retail Deals

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The Federal Trade Commission filed a 24-page lawsuit Monday to block Kroger's proposed $24.6 billion acquisition of supermarket rival Albertsons.

The big picture: The FTC's complaint hits political flashpoints like predatory pricing and the plight of the worker — two issues likely to be amplified during a presidential election year.

Zoom in: Here's what to know from the FTC's assertions in the case, which Kroger disputes.

1. The C&S divest is an insufficient remedy.

The FTC claims Kroger-Albertsons' agreement to sell 413 stores to C&S Wholesale isn't significant enough to maintain existing competition, "nor will it be able to effectively replace Albertsons's position today as a union grocery employer."

No "full, intact business units" were included in the divestiture, and the two grocers "structured the proposed divestiture in a way that inextricably entangles Respondents' and C&S's competitive activities for years," per the complaint. 

The FTC has not forgotten the failed store divestiture from Albertsons' 2014 merger with Safeway that ended in Albertsons reacquiring the assets.

The FTC wants to narrow the market definition, arguing club stores like Costco differ from value chains like Aldi or premium stores like Whole Foods.

These grocers, alongside e-commerce players like Amazon, shouldn't be considered legitimate direct competition in the wake of a combined Kroger-Albertsons, the FTC says. 

Nor should grocery delivery services like Instacart, the complaint argues. 

"A relevant antitrust market need not include all substitute products or services. The loss of competition between a narrower group of substitutes can cause harm, making the narrower group a properly defined antitrust market."

"Customers prefer to purchase grocery products at retailers near where they live or work," the complaint reads.

The grocers overlap significantly in the Northwest, on the West Coast, in the heart of the industrial Midwest, and in Colorado and Arizona. 

The complaint cites specific cities in Alaska, California, the District of Columbia and Virginia, Idaho, Illinois, Indiana, Louisiana, Maryland, Montana, New Mexico, Nevada, Oregon, Texas, Utah, Washington and Wyoming. 

4. Unionized labor and collective bargaining rights are at risk.

Kroger and Albertsons "have a combined share of union grocery labor exceeding 65%" in markets in California, Colorado, Oregon and Washington, the FTC says. 

A deal between the two would "prevent the unions from being able to play them off each other during collective bargaining negotiations, substantially increasing Kroger's negotiating leverage," the complaint says, which has implications around wages, benefits and workplace safety.

The intrigue: The crux of the FTC's argument is that the deal erodes competition — and the regulator says both Kroger and Albertsons have acknowledged that potential.

"Kroger's and Albertsons's own executives recognized that the proposed acquisition would be an unlawful merger under the antitrust laws," the complaint says, citing redacted statements from three executives. 

Loyalty data from each grocer supports the theory the two are direct competitors, the FTC says.

Behind the scenes: If this deal gets blocked, Albertsons will still be for sale, Axios reported — but the prospective buyer pool is small. 

A Kroger spokesperson, in response to the FTC's complaint:

Kroger maintains the merger will enhance competition by moving C&S into new geographies, per a spokesperson.

The spokesperson calls C&S "a well-capitalized competitor that will also secure union grocery jobs."

"Blocking the merger erodes competition by strengthening larger, non-unionized retailers like Walmart and Amazon," the spokesperson says. 

An Albertsons spokesperson, in response to the FTC's complaint:

The merger "will expand competition, lower prices, increase associate wages, protect union jobs, and enhance customers' shopping experience."

If the FTC successfully blocks this merger, "it would be hurting customers and helping strengthen larger, multi-channel retailers such as Amazon, Walmart and Costco – the very companies the FTC claims to be reining in."

The United Food and Commercial Workers International Union:

"The FTC's decision reflects clear concerns over the impact such a megamerger could have on workers, food prices, and millions of customers.  ... The UFCW stands — and will continue to stand — in opposition to any merger that would negatively impact our hundreds of thousands of hard-working members who work at Kroger and Albertsons.

White House deputy director of the National Economic Council Jon Donenberg:

"The White House does not comment on pending litigation. Generally speaking, as he has said repeatedly, the President supports fair and vigorous antitrust enforcement. President Biden has made clear that competition is key to capitalism. When large corporations are not checked by healthy competition, they too often do not pass cost savings on to consumers and exploit their workers."

👀 What we're watching: Members of the UFCW Local 400 Union — which includes workers across 38 stores in Kentucky, Ohio, and West Virginia — will vote on whether to strike this week.

The union says it wants to achieve real raises that overcome inflation, but Kroger's current offer sets wages backward in only increasing them by 12%  — lower than 18% inflation since 2020.

Kroger and Albertsons announced their planned tie-up in late 2022. Revisit the timeline of Axios coverage:

Editor's note: This story has been updated with a comment from  Albertsons on the contents of the suit. 

What to know about the FTC's suit against Kroger-Albertsons

The FTC's complaint hits political flashpoints like predatory pricing and the plight of the worker.

Illustration of an Albertsons' grocery bag inside of a Kroger's bag.

Federal Trade Commission (FTC)

The Federal Trade Commission <a class="gtmContentClick" data-vars-link-text="filed a 24-page lawsuit Monday" data-vars-click-url="https://www.axios.com/2024/02/26/ftc-kroger-albertsons-merger-lawsuit" data-vars-content-id="8498eda6-dd26-45ae-8aa2-b3e653fe3dd5" data-vars-headline="What to know about the FTC&#x27;s suit against Kroger-Albertsons" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2024/02/26/ftc-kroger-albertsons-merger-lawsuit" target="_self">filed a 24-page lawsuit Monday</a> to block Kroger&#x27;s proposed <a class="gtmContentClick" data-vars-link-text="$24.6 billion acquisition" data-vars-click-url="https://www.axios.com/pro/retail-deals/2023/09/29/ftc-challenge-kroger-albertsons-merger" data-vars-content-id="8498eda6-dd26-45ae-8aa2-b3e653fe3dd5" data-vars-headline="What to know about the FTC&#x27;s suit against Kroger-Albertsons" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/pro/retail-deals/2023/09/29/ftc-challenge-kroger-albertsons-merger" target="_self">$24.6 billion acquisition</a> of supermarket rival Albertsons.The big picture: The FTC&#x27;s complaint hits political flashpoints like predatory pricing and the plight of the worker — two issues likely to be amplified during a presidential election year.

What to know about the FTC's suit against Kroger-Albertsons

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