There’s no wonder supermarket giants Kroger and Albertsons are seeking to merge under a $25 billion plan currently on the table.
That’s because how and where America shops for food has become increasingly competitive as big players like Costco, Amazon — with its home delivery service and as owner of Whole Foods stores — and major discount grocers such as Aldi and Walmart have encroached on territories once dominated by old-line supermarket chains.
But given the staggering scale of the potential merger — affecting 700,000 employees and 5,000 stores between the two companies — and the fact that grocery prices nationally were 13% higher in September than they were a year ago, it’s essential that a U.S. Senate subcommittee move forward with its plan, announced this week, to scrutinize the merger plan.
“We will hold a hearing focused on this proposed merger and the consequences consumers may face if this deal moves forward,” Sen. Amy Klobuchar (D-Minnesota), chair of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights said in a joint statement with the panel’s Republican ranking member, Sen. Mike Lee of Utah.
Less competition, higher prices?
Under the merger plan announced last week, Kroger would buy Albertsons for $24.5 billion.
Kroger, the nation’s largest supermarket chain, operates Mariano’s and Food 4 Less stores in Chicago. Jewel stores fly under the banner of Albertsons, the country’s second-largest grocer.
We agree with Klobuchar and Lee, who said they have “serious concerns about the proposed transaction. ... The grocery industry is essential, and we must ensure that it remains competitive so that American families can afford to put food on the table.”
Sen. Richard Durbin (D-Illinois), chair of the Senate Judiciary Committee, is of the same mind also.
Durbin “believes there needs to be a careful, thorough review of this proposed merger in order to ensure that it is not harmful to consumers, workers, or competition,” a Durbin spokesperson told us Wednesday.
Meanwhile, Sen. Elizabeth Warren (D-Massachusetts) took a harder stand by asking the Federal Trade Commission on Wednesday to block the deal entirely. The FTC is required to review whether the merger would violate federal anti-trust laws.
“More mergers and less competition would mean even higher prices, and layoffs for employees,” Warren said.
Merger deserves a watchful eye
In addition to potentially raising food prices, the merger could make it tougher for workers at the companies to seek better wages, said Sarah Miller, executive director of the non-profit American Economic Liberties Project in Washington, D.C.
“This merger is a cut-and-dry case of monopoly power, and enforcers should block it,” Miller said.
Kroger CEO Rodney McMullen told CNBC last week merger talks began two months ago in discussions he held with Albertsons CEO Vivek Sankaran.
“We’ve known each other for years and years and years, and it really was a conversation that the two of us had in terms of there should be something here that makes sense that ends up being good for customers, good for our associates, good for the communities,” McMullen said.
In a statement, Kroger said it would “reinvest approximately half a billion dollars of cost savings from synergies” after the merger to lower prices for customers. The company also said it would use $1 billion to raise worker salaries wages and benefits.
All of which sounds great — but a healthy dose of skepticism is warranted.
The more eyes are on this deal, the better, particularly since the “synergies”would likely mean some stores could be shuttered after the sale.
And where those store closings occur is critically important on Chicago’s South and West sides, where grocers and supermarkets are already few and far between.
Kroger and Albertsons are promising sunshine and rainbows if the merger is approved, but no one should be gullible enough to simply take their words for it.
Given the escalating price of groceries and the amount of food insecurity locally and nationally, the merger is too important not to face tough Senate scrutiny — and a vigorous thumbs down, if warranted.
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