Kroger and Albertsons CEOs defend $25 billion merger in Senate

On Tuesday, the CEOs of Albertsons and Kroger, two of the largest grocery chains in the US, will go before the Senate to answer antitrust questions and defend their demands $25 billion merger. The deal, announced Oct. 14, immediately sparked opposition from lawmakers and union groups over possible antitrust laws. The merger of these two supermarket giants would create a company comparable in size and reach to Walmart.

Kroger CEO Rodney McMullen and Albertsons CEO Vivek Sankaran will face the Senate Judiciary Committee’s Antitrust Committee, chaired by Sens. Amy Klobuchar, a Minnesota Democrat, and Mike Lee, a Utah Republican. While the committee itself can’t turn the deal on its head, it can shed some light on what the massive merger could mean for the sector, consumers and employees at the two chains. The committee is expected to question executives from both companies on issues such as the competitive impact of the transaction, price gouging and employee layoffs.

Ultimately, it will be the Federal Trade Commission that will decide the fate of the megadeal.

Why does fusion happen?

The companies would collectively operate nearly 5,000 stores in the US, giving them an advantage of scale to compete with companies like Amazon and Walmart. Walmart is the largest grocery retailer in the U.S. with more than 5,300 stores, and the merger would put the combined company in a viable position to compete with and potentially overtake Walmart’s place as the national grocery king.

Cincinnati-based Kroger operates grocery chains, including eponymous store Ralphs and Harris Teeter. Based in Idaho, Albertsons has a grocery portfolio that includes Tom Thumb, Safeway, Acme and Jewel-Osco. The companies together currently employ more than 700,000 people.

McMullen, who would serve as the company’s CEO after the merger, said of the transaction, “We are bringing together two purpose-driven organizations to deliver superior value to customers, employees, communities and shareholders.”

As part of the deal, the grocery chains said they would sell up to 375 stores to “create a new, agile competitor” to win over regulators.

What a merger could mean for grocery store prices

While the deal is still subject to FTC approval and won’t be finalized until early 2024, experts are already speculating about the impact the merger of the two largest supermarket chains could have on consumer prices.

Kroger has said it plans to reinvest about $500 million in cost savings to lower prices for consumers. The companies also plan to invest $1.3 billion to “improve” Albertsons’ customer experience. McMullen recently told the Cincinnati Inquirer, “We will be able to continue investing in our employees on pay and in customers on pricing.”

But not all legislators and industry experts are convinced of this. At a time inflation and food prices are a major public concern, the merger has the potential to make things worse. For example, a 2008 study looked at five mergers and found that consumer prices rose between 3% and 7% in four of the five cases.

On Nov. 21, four members of the House of Representatives — Democrats Jerry Nadler of New York, Pramila Jayapal of Washington, David Cicilline of Rhode Island and Adam Smith of Washington — issued a letter to FTC Chairwoman Lisa Khan opposing the FTC pronounce action. “This acquisition threatens to create a competition-stifling concentration in markets across the country that hurts consumers, workers and small businesses. Kroger’s proposed acquisition of Albertsons raises several anticompetitive concerns,” they wrote.

Progressive Senators including Bernie Sanders, a Vermont independent, and Elizabeth Warren, a Massachusetts Democrat, previously urged the FTC to flatly oppose the merger. On the 19th of October Warren tweeted: “Big grocery chains like Kroger and Albertsons are already beating down families with inflated prices. More mergers and less competition would mean even higher prices – and layoffs for employees.”

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