Secretaries of state in seven states have called on the Federal Trade Commission to block The Kroger Co.’s $24.6 billion deal to acquire rival Albertsons Cos.
In a letter on Wednesday to FTC Chair Lina Khan, the secretaries of state for Colorado, Arizona, Vermont, Minnesota, Rhode Island, Maine and New Mexico voiced their opposition to the mega-merger, which would combine the two largest U.S. supermarket retailers. The transaction currently is under antitrust review by federal and state regulators.
“As secretaries of state, we are concerned about preserving a competitive grocery market that ensures fair competition and protects consumers and workers,” the state secretaries said in the letter. “We are strongly opposed to this merger and urge you to stop this corporate consolidation that is draining Americans of their hard-earned wages and livelihoods.”
The secretaries claimed in the letter that the merger would give a combined Kroger-Albertsons almost a quarter of the U.S. food retail market, which they described as “a significant consolidation of the already limited competition within the market.”
Also, the state officials questioned what they said was a Kroger projection of a household savings of $5.88 per year (excluding inflation) from the merger.
“However, once there is such consolidation in the market, many consumers will no longer have choice. Kroger-Albertsons will have no competitive incentive to bring down prices, and—despite what Kroger-Albertsons claims—consumers will be powerless to hold the company accountable to promises of keeping prices low,” the secretaries wrote.
The state secretaries, too, contend Kroger’s acquisition of Albertsons would result in store closings (including in communities with limited food retail access), less choice for consumers, potential job losses and lower wages, as well as excessive market influence over local suppliers, farmers and small business.
“Massive corporate consolidations raise prices and put an even greater burden on American families, who are already struggling to pay bills and keep food on the table,” Colorado Secretary of State Jena Griswold said in a statement on Wednesday. “The federal government must step in to ensure that corporate greed does not result in executives and shareholders enriching themselves while hardworking Americans pay artificially high prices for basic necessities.”
Griswold led the state secretaries’ effort to speak out to the FTC in the letter, also signed by Adrian Fontes (Arizona), Sarah Copeland Hanzas (Vermont), Steve Simon (Minnesota), Gregg Amore (Rhode Island), Shenna Bellows (Maine) and Maggie Toulouse Oliver (New Mexico).
Sizing up grocery market competition
Kroger’s deal to buy Boise, Idaho-based Albertsons, announced in mid-October, would form a company with annual revenue of about $210 billion and 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies, 2,015 fuel centers and 710,000 workers in 48 states and the District of Columbia—marking the largest U.S. supermarket merger ever.
Much of the FTC’s antitrust assessment of the transaction will rest on how broadly or narrowly regulators define the grocery retail marketplace.
In their letter to the FTC, the state secretaries said Kroger-Albertsons would hold almost 25% of U.S. food retail market share. However, an analysis last week by consumer data specialist Numerator pegged that dollar share at 17.9% (10.7% for Kroger, 7.2% for Albertsons) through the second quarter of 2023.
Numerator noted that Kroger’s grocery market share has declined since 2021, while Walmart (25.2%), Costco Wholesale (9.9%), Sam’s Club (5.1%) and Albertsons have seen their share grow. Of the top 10 chains in grocery market share listed by Numerator, five were mass merchants—not conventional supermarkets (another was limited-assortment discount grocer Aldi). And of the top 20 grocery retailers by dollar share, 10 chains weren’t traditional supermarkets (including specialty grocer Trader Joe’s and Amazon).
In Numerator’s list, Kroger was a distant second to Walmart, with less than half of the retail behemoth’s grocery dollar share. Rounding out the top 10 were Costco, Albertsons, Sam’s Club (part of Walmart), Ahold Delhaize USA (7.2%), Publix (5%), Target (3%), Aldi (2.3%) and Dollar General (2.1%).
Kroger and Albertsons have estimated they would need to divest 100 to 375 stores to gain regulatory approval to merge. Their agreement also includes a ceiling of 650 store divestitures, at which point the two retailers could re-evaluate the deal. Stores would be divested through direct sales to other operators and/or via a new spinoff company called SpinCo.
Cincinnati-based Kroger received a second request for information from the FTC on the proposed merger in early December. Citing anonymous sources, the investor website Seeking Alpha reported in June that the grocer is “a couple months away from certifying substantial compliance” with that request, possibly in the calendar third quarter or early fall.
Rodney McMullen, chairman and CEO of Kroger, has said in media interviews and earnings calls that negotiations with the FTC have made headway and the integration process with Albertsons is proceeding. He also told Bloomberg that Kroger hasn’t ruled out litigation if necessary to push through the merger deal.
This spring, McMullen and Albertsons CEO Vivek Sankaran highlighted what they called public “myths” about the merger in a Cincinnati Enquirer op-ed article. The two CEOs basically reiterated what they’ve said publicly since the emergence of the deal: No store closings or job cuts are upcoming, and the combined company plans to use its scale to lower prices, not raise them.
Though Kroger and Albertsons still expect an early 2024 completion for the merger, industry observers have said antitrust clearance likely will take longer for such a large transaction and could last as long as two years. Indeed, the FTC and Department of Justice last month released proposed new guidelines to bolster antitrust enforcement, which could present some extra hurdles for the supermarket merger.