Kroger, Albertsons bracing for FTC decision on deal in January

Kroger Co. and Albertsons Cos. are bracing for a U.S. Federal Trade Commission lawsuit over their proposed $24.6 billion tie-up as soon as January as opposition builds against the supermarket mega-deal.

Progressive lawmakers and the Teamsters union both urged the antitrust agency this week to veto the deal after its yearlong probe.

The FTC has until Jan. 17 to decide on their deal under a timing agreement the companies reached with the agency, according to a court filing in a class action brought by consumers opposed to the deal.

The agency’s deadline hasn’t been disclosed previously.

The agency has been in talks with state attorneys general, who are also reviewing the deal, and could sue to block the transaction or agree to a settlement proposed by the companies.

The divestiture is going to be a “difficult sell” with the FTC, said Bill Kovacic, a former agency chair who now teaches antitrust at George Washington University Law School.

The agency has long been concerned about the adequacy of selling off stores in retail and grocery mergers, and the current FTC is very vocal on this point, he said.

“The FTC is doing their homework,” he said. “They’ll be prepared to be in the courtroom.”

The merger of the two largest supermarket chains has drawn ire over concerns it would reduce consumer choices and undermine bargaining power of workers.

And while the companies have proposed to sell a batch of stores to Piggly Wiggly chain owner C&S Wholesale Grocers Inc. to resolve the antitrust concerns, that remedy has drawn even more fire because of the buyer’s history of reselling supermarkets shortly after acquiring them and moving work away from unionized facilities.

The merger will mean “lower prices and more choices for fresh food for customers and more investments in our communities,” a Kroger spokesperson said in a statement.

“If the merger is blocked, the non-union retailers like Walmart and Amazon will become even more powerful and unaccountable – and that’s bad for everyone,” she added.

A spokesperson for Albertsons said in a separate statement that the merger would “ensure that our neighborhood supermarkets, some of which have been serving their communities for over 100 years, can better compete” against Amazon.com Inc. and Walmart Inc.

The FTC declined to comment.

FTC Chair Lina Khan has attended listening sessions in Colorado, Arizona and Nevada where she criticized settlements from previous supermarket mergers.

Before becoming chair, Khan called the divestitures in the 2015 Albertsons-Safeway deal an instance of a “spectacular” failure on the part of antitrust enforcers.

A combined Kroger-Albertsons would have nearly 5,000 stores across the country merging the banners of Kroger, Ralphs, and Harris Teeter with Albertsons, Safeway, Acme and Jewel-Osco, among others.

That would put it on par with Walmart, which had 5,215 locations between its stores and warehouse retailer Sam’s Club as of Oct. 31.

The two biggest grocers in the US compete head-to-head in dozens of markets – in 2021, Kroger listed Albertsons as one of its two biggest rivals in 14 major markets, including Los Angeles, Dallas-Fort Worth, Denver and Phoenix, and 18 smaller ones such as Anchorage, Alaska, and Santa Barbara, California.

To reduce the antitrust concerns, the companies agreed to divest 413 stores to C&S along with Quality Food Centers, Mariano’s and Carrs brands along with eight distribution facilities.

The proposed divestiture to C&S would more than triple the number of stores it operates and expand its business to the West Coast where the company has a limited presence.

But C&S has frequently offloaded the supermarkets it bought, said Krista Brown, a senior policy analyst at antitrust advocacy group American Economic Liberties Project.

After buying more than 185 Grand Union supermarkets when that company went bankrupt in 2000, C&S later resold most of them and within six years operated only about 30 supermarkets.

“C&S has not proven itself to be a successful operator,” Brown said. “This proposed divestment is far from creating a potential viable competitor.”

The Teamsters, which represent 22,000 workers at Krogers and Albertsons, also came out strongly against the proposal this week, saying it would likely cut 1,200 jobs within months.

“C&S has driven one grocery business after another into the ground for 30 years,” said Tom Erickson, director of the union’s warehouse division.

“This anti-union company has just one playbook when it comes to acquiring Teamster companies or grocery distribution contracts where our members work: close it down, bail on pensions, and move the work to one of their nonunion sites.”

Teamsters represents many warehouse employees and truck drivers, while the United Food and Commercial Workers International, mainly represents in-store workers. UFCW also opposes the deal.

C&S didn’t respond to requests for comment.

C&S’s small position in the grocery market may raise red flags for the antitrust enforcers after the failure of Albertsons’ last spin-off.

In 2015, the agency allowed Albertsons to buy Safeway after it sold 168 stores, the bulk of them to Washington state grocer Haggen Holdings LLC. Less than a year later, Haggen filed for bankruptcy and Albertsons bought back a number of the stores.

Some of those same stores could be switching hands again: The grocers said they plan to sell 104 stores in Washington state to C&S.

California is among the states most impacted by the deal: A combined Kroger and Albertsons would have 895 stores in the state, though they pledged to sell at least 66 of them to C&S.

In October, California Attorney General Rob Bonta told reporters his office was considering a suit, though no final decision had yet been reached.

A group of progressive lawmakers including Senators Elizabeth Warren, a Massachusetts Democrat, and Bernie Sanders, an Independent from Vermont, cited the Haggen bankruptcy in a letter to the FTC this week calling on the agency to block the deal.

The members of Congress said the C&S divestiture wouldn’t ameliorate the harms to competition posed by the merger.

Alaska’s lawmakers, including both Republican senators and the state’s lone Democratic representative, have also expressed concern about the deal given its impact in the state