Generally speaking, there's not much interest in who owns which grocery store but the long-pending $25 billion merger between Kroger and Albertsons has been throwing sparks since it was announced in October 2022. Now, with a Presidential race heating up and consumers already miffed by high grocery prices, it could turn into a wildfire.
The latest match was lit by Kroger this week when it sued the Federal Trade Commission, claiming the FTC tribunal hearing the matter is unconstitutional. Kroger wants the case moved to federal court.
There's already a trial scheduled before a federal judge in Portland, Ore. where the FTC has asked the judge to temporarily block the merger while the FTC's tribunal hears the case. That's the tribunal that Kroger now claims is unconstitutional.
The FTC is arguing that the merger would raise prices for millions of consumers while also squeezing the labor market for unionized grocery store workers.
Besides arguing that the FTC in-house tribunal is unconstitutional, Kroger argues that the in-house review could take years, according to a Reuters report.
Political candidates are wading into the controversy. Presidential hopeful Kamala Harris has accused supermarkets of price gouging, a claim vociferously denied by industry leaders. Former president Trump has accused Harris of contributing to inflation while served in the Biden administration.
Harris and some economists have called for price controls on the food industry, while others say that effort would reduce efficiency and drive up prices over time.
Selling off some stores
Kroger and Albertsons have agreed to sell off some stores in areas where the merger would increase the merged companies' control. Some Kroger-owned stores like Vons would be sold to the parent company of Piggly Wiggly, for example.
Arguments for and against
Both sides have strongly argued their views. Arguments for the merger include:
- Increased competition with larger retailers: Proponents argue that the combined company would be better positioned to compete with industry giants like Walmart and Amazon, leading to lower prices and improved services for consumers.
- Improved efficiencies and cost savings: The merger could result in streamlined operations, reduced overhead costs, and increased bargaining power with suppliers, which could translate into lower prices for consumers.
- Expanded access to products and services: The combined company could offer a wider variety of products and services, including expanded online shopping and delivery options, benefiting consumers in both urban and rural areas.
Arguments against include:
- Reduced competition and higher prices: Opponents contend that the merger would lead to decreased competition in the grocery industry, resulting in higher prices, reduced product choices, and lower quality for consumers.
- Job losses and wage cuts: Critics worry that the merger could result in store closures, layoffs, and reduced wages and benefits for grocery workers.
- Harm to small businesses and suppliers: The combined company's increased bargaining power could negatively impact small businesses and suppliers, forcing them to accept lower prices and potentially driving some out of business.
Grocery prices have been rising more or less steadily since 2021, due to a complex web of causes, including higher wages, the necessity to make the post-pandemic food supply chain more resilient and the same inflation that affects consumers and other industries.
The food industry notes that it has tiny profit margins of only one or two percent, while critics note that "turnover" -- the speed at which products move from creation to sale -- is much faster than most other industries, thus creating faster cash flow.