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THE KROGER ALBERTSONS MERGER HEARING HAS ENDED. WHAT HAPPENS NEXT?

Alexander Coolidge
Cincinnati Enquirer


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PORTLAND, Ore. – Attorneys for the Federal Trade Commission and Kroger and
Albertsons ended their three-week court battle the same way they started:
diametrically opposed over whether the two grocery rivals should be permitted to
join forces.

Lawyers for the regulator said the $25 billion proposed transaction would
eliminate critical grocery store competition and lead to higher prices for
consumers while endangering jobs for tens of thousands of workers and
threatening communities with potential store closures and food deserts.


PARTING THOUGHTS AS HEARING CONCLUDES

“Consumers depend on competition,” FTC attorney Susan Musser told the court,
dismissing the grocers’ argument that consumers were awash in competition with a
variety of retailers selling food. “Common sense says these aren’t a good
substitute for supermarkets.”



Attorneys for Kroger and Albertsons insisted the deal would boost competition by
strengthening both companies as a unified company, repeated company promises to
lower grocery prices by $1 billion and not to close stores or lay off front-line
workers.

“Millions of shoppers are going to see their bills go down,” Kroger attorney
Matt Wolf told the court, adding workers would see their pay increase and
communities would enjoy Kroger stores in addition to proliferating Walmarts and
Aldis.




DUELING CONCEPTS OF COMPETITION

Fundamental disagreements define the case: regulators contend they must preserve
competition among traditional grocery stores because they offer a unique
consumer benefits, primarily a selection of tens of thousands of items under one
roof. That’s a problem for Kroger and Albertsons who want to join because while
there are retailers that are larger grocers, they are the No. 1 and No. 2
“one-stop shop” supermarkets, according to regulators’ vision of their industry.



Kroger and Albertsons contend their industry has changed and continues to do so
and that regulators should consider any retailer selling food a grocery
competitor. Such a viewpoint also makes it much easier to justify the
transaction, which would give the combined companies nearly as large a grocery
business as the largest grocer in the world: Walmart, which sold $264 billion in
food in the U.S. alone last year.

While regulators consider supercenters like Walmart and Target as comparable,
they don’t consider such food-selling retailers, such as Costco, Aldi, Trader
Joe’s or Dollar General as comparable peers, largely due to their much smaller
selections.



Besides the irreconcilable views on peer groups, both sides sharply differ on
how to evaluate local markets to determine if the merger would give the merged
company too big a share of local sales. The debates over defining local markets
resemble lawmakers attempting to re-draw legislative districts.


WHAT'S NEXT?

US District Judge Adrienne Nelson said she would take the case under advisement
and promised to “work as quickly as possible” to render her decision on whether
to grant a court order barring the deal as federal regulators continue their
broader case in a court in Washington, D.C. Still, Nelson said she was offering
“no timeline” for her ruling.

Both sides have until Sept. 27 to submit their final written arguments to the
court, which Nelson will use as part of her deliberation.

While the proceeding was technically a hearing for a preliminary injunction,
antitrust regulators say such hearings amount to a “mini-trial” where regulators
must convince a judge they have a likelihood of ultimately winning their case.
Many mergers that lose such hearings give up their plans to merge as losses mean
unacceptable and expensive delays – an attorney for Kroger at the beginning of
the hearing cautioned the deal “will not occur” if it loses the ruling.




UNIONS OPPOSE THE MERGER

A group of merger opponents led by six chapters of the United Food and
Commercial Workers International Union, called Stop the Merger, said the hearing
unearthed new details that made them even more opposed to the proposed deal.

“Evidence that came out during the trial only elevated the level of concern from
unions and the public at large about the looming harm that would be caused if
the merger goes through, as well as increased the level of distrust of the CEOs
and other executives running the companies,” the group said Tuesday.


HOW BIG IS THIS MERGER?

First announced in October 2022, Cincinnati-based Kroger wants to buy all
outstanding shares of Boise, Idaho-based Albertsons, adding most of its
employees and stores to its supermarket operation. To counter concerns about
maintaining competition, Kroger has agreed to sell 579 stores to C&S Wholesale
Grocers, a grocery supplier that also operates about two dozen retail
supermarkets, including Piggly Wiggly.



Upon completion, Kroger would operate more than 4,400 supermarkets (up from
2,700) generating about $208 billion in annual sales (compared to $150 billion
before). If approved, Kroger would employ about 640,000 workers (up from about
414,000 currently), which could make it one of the 10 largest private employers
in the world.

However, regulators at both federal and state levels have expressed deep
concerns. They are worried C&S Wholesale Grocers' limited experience as a
retailer will prevent it from being a strong competitor and that could lead to
higher prices for consumers. They are also worried about the job security of the
60,000 workers that could be moved to C&S Wholesale Grocers.

For the latest on Kroger, P&G, Fifth Third Bank and Cincinnati business,
follow @alexcoolidge on X (formerly Twitter).



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