The Federal Trade Commission and eight states said on Monday they are suing to block supermarket chain Kroger‘s $24.6 billion deal to buy smaller rival Albertsons, saying it would boost grocery prices for millions of Americans.
The deal, which would include Vons and Pavilions in Southern California and create a grocery empire with more than 4,000 stores, has drawn tough scrutiny from lawmakers and consumer groups worried about higher grocery prices, job losses, store closures and diminishing choice for consumers.
The FTC charged the deal will eliminate “fierce competition between Kroger and Albertsons “leading to higher prices for groceries and other essential household items for millions of Americans.”
U.S. food prices have risen by 25% over the last four years, and while food inflation is showing signs of cooling off in 2024, grocery bills have become a growing concern for shoppers.
Shares of Kroger were trading 1% lower. Albertsons stock rose 0.3%.
Kroger defended its deal, saying it has reduced prices every year since 2003 and would apply its business model to the merged company.
The FTC’s legal efforts “only strengthens larger, non-unionized retailers like Walmart, Costco and Amazon.com by allowing them to further increase their overwhelming and growing dominance of the grocery industry,” Kroger said in a statement.
Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming are joining the commission’s federal lawsuit, the FTC said.
California Attorney General Rob Bonta has raised concerns over access to pharmacies and fresh groceries in rural areas and small towns for poorer people.
The FTC said the merger would hurt the grocery story unions because the combined company “would have more leverage to impose subpar terms on union grocery workers that slow improvements to wages, worsen benefits, and potentially degrade working conditions.”
The decision comes shortly after two U.S. states — Colorado and Washington — sued to block the merger, citing concerns around higher prices for consumers.
“This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years. Kroger’s acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today,” said Henry Liu, Director of the FTC’s Bureau of Competition.
Kroger has said retail giants such as Walmart and Amazon.com would become “even more powerful and unaccountable” if its merger with Albertsons was blocked.
The FTC’s lawsuit deal comes at a time when the Biden administration has pushed back against big-ticket mergers that risk price hikes, affecting consumers in areas ranging from medicines to airline tickets.
From surging egg and poultry prices, to costlier bacon and butter, food inflation has chipped away at incomes and dampened enthusiasm about the economy in recent years.
Kroger, the biggest grocer in the U.S. by revenue, has proposed to divest 413 stores and eight distribution centers to C&S Wholesale Grocers, and said it may need to shed an additional 237 stores to gain regulatory approval. The FTC called that proposal inadequate.
The deal was also opposed by at least six U.S. lawmakers, including Senators Elizabeth Warren and Bernie Sanders, who have written to the FTC highlighting the impact on consumers and suppliers from such a consolidation in the grocery industry.
The merger, first announced in October 2022, also faced resistance from the United Food and Commercial Workers International Union, which represents more than 1 million workers in the grocery and other essential industries in North America, and voted to oppose the deal in May last year.