FTC Challenges Kroger’s Acquisition of Albertsons

Today, the Federal Trade Commission sued to block the largest proposed supermarket merger in U.S. history—Kroger Company’s $24.6 billion acquisition of the Albertsons Companies, Inc.—alleging that the deal was anti-competitive.

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 narrowing consumers’ choices for where to shop for groceries. For thousands of grocery store workers, Kroger’s proposed acquisition of Albertsons would immediately erase aggressive competition for workers, threatening the ability of employees to secure higher wages, better benefits, and improved working conditions.

Harm to Consumers

In addition to raising grocery prices, the FTC alleges that Kroger’s acquisition of Albertsons would diminish their incentive to compete on quality. Today, Kroger and Albertsons compete to improve their stores in many ways, including offering fresher produce, higher quality products, improved private label offerings, a broader array of in-store services, flexible store and pharmacy hours, and curbside pickup services.

The FTC charges that the deal would eliminate head-to-head price and quality competition, which have driven both supermarkets to lower their prices and improve their product and service offerings. If the merger occurs, grocery prices will increase, and Kroger and Albertsons’ incentive to improve product quality and customer service will decrease, further harming customers.

Harm to Workers

Kroger and Albertsons are the two largest employers of union grocery labor in the United States. They actively compete against one another for workers. The two companies also try to poach grocery workers from each other, especially in local markets where they overlap. Currently, most workers for both supermarket chains are members of the United Food and Commercial Workers (UFCW) union.

UFCW and other unions today leverage the fact that Kroger and Albertsons are separate and competing companies. Unions push for both supermarket chains to negotiate better employment terms for union grocery workers, especially when negotiating over collective bargaining agreements (CBAs).

However, a combined Kroger/Albertsons would gain increased leverage over workers and their unions—to the detriment of workers, the FTC alleges. The combined Kroger and Albertsons would have more leverage to impose subpar terms on union grocery workers that slow improvements to wages, worsen benefits, and potentially degrade working conditions. In some regions, such as in Denver, the combined Kroger/Albertsons would be the only employer of union grocery labor. Union grocery workers’ ability to leverage the threat of a boycott or strike to negotiate better CBA terms would also be weakened.

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[OCS: Instead of allowing two compatible companies to combine to respond to increasing competition from companies such as Amazon, Walmart, and Costco, the FTC is ignoring efficiencies of scale and lowering operational costs to artificially increase the cost of labor.]

[Lena Khan]

One thing that our lawsuit alleged was that if this merger goes through, it’s going to mean higher grocery prices for shoppers, but it’s also going to be worse for the workers. And this is the first time that the FTC has ever sought to block a merger, not just because it will be bad for consumers, but also because it will be bad for workers. And especially in recent decades, antitrust enforcers had not really been focused on the worker harms as much.

And that’s something we’ve really looked to change. So the complaint lays out how previously, when there has been competition between Kroger and Albertsons, that the workers at each store were able to use that competition as leverage when they were trying to bargain. And that if you allow these two companies to merge, that leverage that comes from having a potential alternative employer or an alternative store where customers can go if there’s a strike, but eliminating that leverage point and bargaining leverage would ultimately be bad for workers.

So again, this is still being litigated, but that was in the complaint as an explanation for why this merger would be bad for workers. When the FTC team put on the trial, they actually had on the stand some of the workers that are currently employed by these stores so that they could also share their experience. And just generally, I mean, there’s a lot of empirical evidence that now shows that after mergers, workers have seen pay cuts or a limit in any pay rises.

You often see layoffs. You can see workers have less negotiation power to figure out, will I even have a stable, predictable schedule? And so these are all dimensions of competition on the labor front that are important to protect for people.