Food watchdog group urges FTC to nix Kroger-Albertsons merger deal

The Center for Science in the Public Interest (CSPI), a nonprofit food and nutrition watchdog group, has called on the Federal Trade Commission to reject the Kroger-Albertsons supermarket mega-merger.

In a letter sent Monday to FTC leaders, CPSI argued that the $24.6 billion deal—joining the nation’s two largest conventional supermarket operators—would unbalance the grocery industry playing field by consolidating retailer and manufacturer control, in turn hoisting prices and impacting food security in some market areas.

Combined, The Kroger Co. and Albertsons Cos. would hold a 22% share of the food retail market, second only to Walmart at nearly 35% and well-ahead of third-place Costco Wholesale at just over 12%, CPSI said in the letter. As a result, post-merger, Kroger-Albertsons and Walmart would control a roughly 57% share of the U.S. grocery retail market, spanning supermarkets, independent grocery stores, warehouse clubs and mass merchants/supercenters, according to CSPI.

“Food prices are higher than ever before, and 40 million Americans live in areas with low incomes and limited access to healthy, affordable food,” CSPI President Peter Lurie said in a statement. “The proposed merger of Kroger and Albertsons will likely mean higher prices, fewer stores and less competition. It might be a good move for executives and shareholders, but the merger would be an economic blow to Americans, especially those whose jobs would be lost post-merger.”

The organization concluded in the letter, “We urge the FTC to seek to enjoin this merger.”

In particular, CSPI cited plans by Kroger and Albertsons to divest 100 to 375 stores to win FTC approval for the merger. The watchdog group said the disposition of stores underscores that the merger would squeeze competition in numerous states, foster “anticompetitive concentration in local markets” and potentially lead to job losses and store closings.

“In addition to outlining its concerns in a letter to members of the FTC, CSPI today announced that it was formally joining the ‘Stop the Merger’ coalition, led by local chapters of the United Food and Commercial Workers and other labor and economic justice organizations concerned with job losses, higher food prices and negative impacts on farmers and suppliers resulting from the merger,” the watchdog organization announced Monday.

CSPI’s letter to the FTC comes about two weeks Kroger Chairman and CEO Rodney McMullen and Albertsons Cos. CEO Vivek Sankaran addressed what they called “misconceptions” about their companies’ proposed merger in a Cincinnati Enquirer op-ed article. They cited three “myths” about the deal’s potential impact: “My store will close,” “I am going to lose my job and my union will be hurt” and “My groceries are going to be more expensive.” The two CEOs basically reiterated what they’ve said publicly: No store closings or job cuts are forthcoming, and the combined company aims to use its scale to lower prices, not raise them.

When the merger was announced in mid-October, Kroger and Albertsons said they plan to divest 100 to 375 stores through direct sales to other operators and/or a newly formed spinoff company, dubbed SpinCo. The agreement also includes a ceiling of 650 store divestitures, at which point the companies could re-evaluate the transaction.

“We understand the idea of a trusted neighborhood store closing is worrisome. That’s why Kroger committed to zero store closures as a result of the merger, and the company will invest in stores post-merger,” the CEOs wrote in the Enquirer article.

Both executives also countered claims about potential job cuts from the merger. Kroger, which is acquiring Albertsons under the deal, said it aims to invest $1 billion in associate wages and comprehensive benefits after the transaction closes. The retailer also has cited investments totaling $1.2 billion in associate compensation and benefits since 2018.

“No frontline workers will be laid off as a result of the merger,” McMullen and Sankaran stated in the Enquirer column. “The combined company will have one of the largest unionized workforces in the country. We are committed to protecting and expanding opportunities for union jobs.”

On so-called “myths” that a combination of Kroger and Albertsons would lift grocery pricing, McMullen and Sankaran said in the op-ed that Kroger plans $500 million in cost savings from merger synergies to be reinvested in lower pricing at the shelf, and another $1.3 billion would be allocated for upgrades of Albertsons Cos. stores. Kroger also has said its business strategy is to “lower prices year over year” to draw more customers and earn their loyalty, and the retailer reported that it has sliced margins by over $5 billion since 2018 while raising customer counts.

CSPI, however, noted in the FTC letter that the Kroger-Albertsons merger also would spur food industry consolidation on the supply side that would have ripple effects on the retail side. The watchdog group said the merger would concentrate “retailer control of trade promotion practices,” such as slotting fees and “category captain arrangements where a single brand exerts influence on product placement and pricing across entire categories of foods.”

That concern reflects efforts by the National Grocers Association and independent operators to sway regulators to crack down on “retail power buyers,” referring to big grocery players that use their scale to command more favorable supply terms, lower pricing, special product package sizes and first call on high-demand items.

“Smaller suppliers could face higher barriers to entry, further ceding control to major food manufacturers and processors and their predominantly unhealthy products, and ultimately limiting consumer choice,” CSPI explained about the merger. “And while store closure and food price concerns are manifest in local markets, this buyer power consolidation creates anticompetitive concerns in regional and national markets, underscoring the widespread anticompetitive impacts of the proposed merger.”