Kroger, Albertsons merger should be safe with divestiture: report

History says the $24.6 billion Kroger, Albertsons merger should survive any lawsuit, ultimately getting the stamp of approval from the Federal Trade Commission (FTC), according to a new report.

A white paper recently released by the International Center for Law & Economics, titled “Food-Retail Competition, Antitrust Law, and the Kroger/Albertsons merger,” says the only supermarket merger that has been challenged in court since American Store’s acquisition of Lucky Stores in 1988 is the Whole Foods/Wild Oats merger in 2007.

Furthermore, over the last 35 years the FTC has allowed every grocery merger to move forward, as long as there were divestitures. Kroger and Albertsons will sell 413 stores to C&S Wholesale Grocers if their deal is approved.

The white paper also points out attempts to block the transaction would go against the analytical framework historically used to evaluate similar mergers, as well as the historical precedent of accepting divestitures as a remedy to address localized problems where they arise.

Last week, California Attorney General Rob Bonta said he was considering filing a lawsuit against the merger because it would result in higher prices for consumers, lower payments to local farmers, the possibility of food and pharmacy deserts, and have a negative impact on workers.

Related:Former FTC policy director: Kroger, Albertsons merger is facing ‘a hurricane storm’

“With the FTC’s knowledge of the industry and of its own past successes and failures, divestitures remain an appropriate and adequate remedy for this merger,” the authors said. “The parties appear committed to working cooperatively with regulators to craft divestitures that fully resolve competitive concerns. Rather than blocking the deal outright, the FTC can allow the merger to proceed, conditioned on acceptable divestitures that protect consumers, while permitting efficiency gains across the majority of stores.”

The grocery market has also evolved over the last two decades, which also favors the Kroger, Albertsons merger. According to the white paper, shoppers use other means to purchase groceries, including online and via wholesale clubs. Supermarkets used to command an 81% share in retail sales, but that number dropped to 56% in 2021 while wholesale clubs claim a 42% market share, the authors said.

A Kroger, Albertsons combined enterprise would account for 9% of nationwide sales, which would still be less than Walmart and Amazon, noted the whitepaper.