Grocery store merger will have large impacts for farmers and consumers

The proposed merger between grocery giants Albertsons and Kroger has hit a roadblock, as the Federal Trade Commission has sued the $24.6 billion merger— the largest proposed grocery store merger. The merger would combine well-known brands such as Fred Meyer, Quality Food Center, Safeway and Haggen under one ownership. The FTC sued saying the deal is anticompetitive. 

According to the FTC’s press release the FTC charges that the proposed deal will eliminate fierce competition between Kroger and Albertsons, leading to higher prices for groceries and other essential household items for millions of Americans. The loss of competition will also lead to lower quality products and services, while also narrowing consumers’ choices for where to shop for groceries according to the FTC press release. 

“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,” Henry Liu, Director of the FTC’s Bureau of Competition said in the FTC press Release. “Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating.” 

The FTC issued an administrative complaint and authorized a lawsuit in federal court to block the proposed acquisition pending the Commission’s administrative proceedings. A bipartisan group of nine attorneys general is joining the FTC’s federal court complaint. 

Kroger operates thousands of stores across 36 states, which includes regional banners such as Fred Meyer, Fry’s, Harris Teeter, King Soopers, Kroger and Quality Food Centers (QFC). Albertsons also operates thousands of stores across 35 states under regional names including Albertsons, Haggen, Jewel-Osco, Pavilions, Safeway and Vons.  

If the merger were completed, Kroger and Albertsons would operate more than 5,000 stores and approximately 4,000 retail pharmacies and would employ nearly 700,000 employees across 48 states. 

Executives for both Kroger and Albertsons have acknowledged that the two supermarkets are direct competitors, forcing each other to aggressively compete for customers by lowering prices and for employees by providing better pay and benefits across the country.  

Similarly, executives for both supermarket chains have conceded that Kroger’s acquisition of Albertsons is anticompetitive, with one executive reacting candidly to the proposed deal: “you are basically creating a monopoly in grocery with the merger.” 

“We are confident this expanded divestiture package will provide the stores, supporting assets and expert operators needed to ensure these stores continue to successfully serve their communities for many generations to come,” C&S CEO Eric Winn said in a statement earlier this year. 

While Winn said he had confidence that an expanded divestiture package would ensure the continued success of the stores involved, Washington Congresswoman Kim Schrier and the FTC have raised concerns about the potential negative impacts on consumers and farmers. Schrier believes that the merger could lead to increased prices for consumers and store closures, potentially affecting hundreds of jobs in the state. 

“I would say that we are already paying absorbent prices at the grocery store and already being gouged both by the gigantic corporations that get their products in the grocery stores,” Schrier said. “Then those products are padded, and grocery store profits are up and if we take away competition by merging the four stores that supply most of Washington State, all under one common owning company. That always drives up prices for consumers and that is what I am looking to guard against.” 

Schrier also highlighted the potential negative effects on local farms, as they may face even more financial pressure if the merger were to go through. She pointed out that family farms are already struggling, and this merger could exacerbate their challenges. 

“If there is a merger here, they can anticipate even more downward pressure on what they earn from sales of their produce and they are also getting squeezed by the cost of inputs and the cost of labor,” Shrier said. “So, we are already seeing family farms being put out of business and this will make it even worse for the farmers in Washington State.” 

Shrier said that Washington will likely see 124 stores close, if the merger were to occur. The Congresswoman explains that without competition between the two companies, there will be no need for stores to exist in close vicinity to one another, which will result in store closures. This will result in hundreds of people also losing their jobs.  

“There will likely be opening of other stores,” Shrier said. “The problem is that it seems like a bit of a scam because their other stores are coming from a different state that has no presence in the northwest and is very likely to fail and then get gobbled up once again by the Kroger merger. I think that this is a red herring, and we should not fall for it.” 

Kroger and Albertsons have released a statement affirming their commitment to keeping all stores open and retaining all frontline associates with industry-leading benefits and wages. The companies also emphasized that customers would benefit from lower prices and more choices post-merger, with Kroger pledging to invest $500 million to lower prices immediately after the merger and an additional $1.3 billion to improve Albertsons’ stores. 

Despite these assurances, Schrier remains skeptical of the merger’s potential benefits and its impact on consumers, jobs and local farms. She fears that the consolidation of the grocery market in Washington State could lead to a lack of competition, driving up prices and pushing small farms out of business.  

As the debate continues, it remains to be seen whether the merger will ultimately be approved or whether concerns raised by Schrier, and the FTC will lead to its demise.