Colorado Attorney General warns Albertsons and Kroger merger could increase grocery prices
COLORADO SPRINGS, Colo. (KRDO) -- Attorney Generals throughout the country, including Colorado’s Phil Weiser, are concerned a $24.6 billion merger between Kroger and Albertsons will raise costs for shoppers.
Patty Lif has been an employee of King Soopers for 13 years. She’s worried the merger between Albertsons — the parent company of Safeway — and Kroger — the parent company of King Soopers — will lead to job loss.
“Who knows what stores are going to close,” Lif said. “There's a Safeway right down the road from us. We're going to see potential job loss. We just are. There's not enough jobs for all these people.”
In October 2022, Kroger announced the megamerger. In a press release, Kroger said the merger "will expand customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households with a premier omnichannel experience."
Under the terms of the agreement, Kroger will purchase all of the outstanding shares of Albertsons Companies, Inc., for an estimated $34.10 a share. That equals about $24.6 billion.
Collectively, Kroger and Albertsons employ more than 700,000 people and operate a total of nearly 5,000 stores across the country.
This is why Colorado’s Attorney General Phil Weiser, along with other states and the Federal Trade Commission, are investigating the merger. Weiser said it limits competition — a violation of the state and federal antitrust laws.
“If you have a merger, do you then get down to one supermarket, which means people lose their jobs, people lose variety or backup options and people may pay higher prices because of no competition,” Weiser said.
To block the merger, states or the FTC would have to prove in a court of law that the merger would create a monopoly, lessening competition.
Weiser said he will spend nearly all of 2023 talking with communities. If he finds evidence the merger violates antitrust laws, he can file a lawsuit. Even if the FTC doesn’t pursue its own federal lawsuit, Weiser can file one in the Colorado courts for violating the state’s Antitrust Act.
However, given the merger is nationwide, Weiser is unsure how a state lawsuit could affect the merger, as there is no established precedent from a similar situation.
“I don't know how many precedents are directly on this issue,” Weiser said. “Is a Colorado case somehow stopping the merger only in Colorado? What does that mean? Or is that necessarily impossible to do because it's one company? We could potentially stop the whole merger.”
Weiser and other states' Attorney Generals have already lost some momentum.
Along with the announcement of the merger, Albertsons said it would pay a dividend of up to $4 billion to its shareholders, or around $6.85 per share. Washington state Attorney General Bob Ferguson and Wesier tried to block the payment of the dividend, arguing it impedes Albertson's ability to compete by sinking them deeper into debt. Still, a Washington state judge allowed the payment.
“The concern we had, and we fought this in court, is that that could make for a harder remedy to the merger, because if you have an entity that is saddled up with that, they may not be as effective in the marketplace,” Weiser said.
Kroger said the merger will provide workers with better pay and benefits and give shoppers lower prices.
“Kroger plans to invest in lowering prices for customers and expects to reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers,” it said in a press release. “An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience.”
The company's CEO Rodney McMullen doubled down during a Senate judiciary committee hearing this fall.
"This merger will enhance competition lower prices improve the customer experience and create investments in our associates," he said.
Still, Weiser said with fewer options for shoppers, prices will rise.
“A lot of people who go to the grocery store, they're nervous about a merger because they shop at both stores and they compare prices, they compare what products there are,” Weiser said. “The concern they have is if you end up going from a 2 to 1 situation, they lose that comparison shopping advantage that consumers now have.”
Lif, a member of the United Food and Commercial Workers Local 7, agrees. However, not everyone thinks the merger will rise costs.
Alex Bleier, a King Soopers shopper, said he hopes a merger will bring down prices.
“I'm okay with the merger, you know, economies of scale,” he said. “Hopefully prices will come down as a consequence.”
Kroger sent 13 Investigates a statement that said:
Our merger with Albertsons provides meaningful, measurable benefits to America’s consumers, associates of both companies, and the communities we serve. As we have in past mergers, we will hold ourselves accountable to our associate and customer commitments, including lowering prices starting on day one post-close. We will also continue to invest in our associates by investing an additional $1 billion to raise wages and our comprehensive, industry-leading benefits.
Kroger will not close any stores, distribution centers or manufacturing facilities as a result of this merger, including stores that may need to be divested to obtain regulatory approval. Kroger intends to position any store that is not part of the combined company for success going forward.