Western Farm Press Logo

Kroger and Albertsons are the first- and second-largest supermarket chains in the U.S.

Jason Resnick, Senior vice president and general counsel

February 3, 2023

3 Min Read
Shopper in meat aisle
A shopper looks at meat.USDA ARS

Western Growers joined with the California Fresh Fruit Association and Colorado Fruit & Vegetable Growers Association to recently submit comments to the Federal Trade Commission on the proposed merger of grocery giants Kroger and Albertsons.

While the companies’ investors might see a profitable upside, farmers have good reason to be concerned this deal, worth nearly $25 billion, is bad for producers. The two retail giants combined would account for 15.6% of the U.S. grocery market share, second only to Walmart at 21%.

Kroger says the deal would help it better compete against Walmart Inc. on prices. Industry’s comments make the case that the deal, if granted approval by the FTC, will harm suppliers of fresh produce by decreasing competition since the newly combined megastore would have significantly more leverage over the growers and shippers that feed the nation, causing reduced farm profits and farmworker jobs.

Antitrust concerns

The FTC and Justice Department each have jurisdiction to determine if it violates antitrust law, though the FTC has historically scrutinized mergers involving grocery chains and has taken the lead in reviewing this deal.

The government’s policy on antitrust mergers & acquisitions review has shifted after decades of a relatively permissive stance to a markedly more interventionist, activist policy, under the Biden administration. On Dec. 6, the FTC asked Kroger for more information on the deal, known as a second request, potentially dragging out the antitrust review process for the merger by months or even years.

Kroger and Albertsons are the first- and second-largest supermarket chains in the U.S. Viewing the field of competition through that limited lens would likely compel the FTC to block the deal. However, expanding consideration of the food retail market to include other types of stores that sell groceries, such as Walmart (21% market share), Costco (7%), online-grocer leader Amazon, among other smaller regional players, could help tip the scales in favor of approving the merger.

To preemptively address the antitrust regulators’ concerns that the merger will stifle competition in markets where they have overlapping stores, Kroger and Albertsons announced that it will offload up to 375 Albertsons locations to a separate company controlled by Albertsons shareholders. The FTC demands divestitures and other concessions to promote competition, but such measures can backfire.

When Albertsons and Safeway merged in 2014, Haggan, a grocery chain based in the northwest with just 18 locations, acquired 146 former Albertsons and Safeway stores. But less than a year later, the over-extended Haggen went bankrupt, closing many of the stores it purchased and selling other stores through the bankruptcy proceedings at a lower price to supermarket bidders including…you guessed it, Albertsons.

The spectacular failure of the Albertsons-Safeway merger is a cautionary tale, with concerned lawmakers referring to it repeatedly in the context of scrutinizing the Kroger-Albertsons deal.

Increased scrutiny

At a Senate Judiciary hearing in November, nearly a dozen lawmakers grilled Kroger and Albertsons CEOs on the potential impacts of the mega-merger. They raised concerns about food inflation, lost employee bargaining power and lost jobs if the deal is approved. Industry groups, labor unions and consumer groups have also weighed in, noting that the merger will increase already rising food prices boosted by high inflation.

Western Growers urges the FTC to block Kroger from acquiring Albertsons. A Kroger-Albertsons mega-buyer would imbue the new behemoth with exceptional buying power capable of further squeezing its suppliers. The inevitable result will be further shrinking already skinny farm margins, lost farmworker jobs and earnings, and higher food prices. The merger is bad for just about everyone who is not a Kroger or Albertsons investor.

Western Growers’ letter to the FTC can be viewed in the News section on wga.com.

[Jason Resnick is senior vice president and general counsel for Western Growers.]

Source: Western Growers

About the Author(s)

Jason Resnick

Senior vice president and general counsel, Western Growers

Jason Resnick is senior vice president and general counsel for Western Growers.

Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters

You May Also Like