US FTC Blocks Kroger-Albertsons 'Supermarket Giant' Merger

The U.S. competition authority, the Federal Trade Commission (FTC), has blocked a roughly $25 billion merger and acquisition (M&A) deal between supermarket giants. The FTC filed a lawsuit to prevent the merger of Kroger and Albertsons, the first and second largest supermarket chains in the U.S., arguing that it would lead to further price increases on groceries.

[Image source=Reuters Yonhap News]

According to the Wall Street Journal (WSJ) and other sources on the 26th (local time), the FTC filed a lawsuit in the Oregon federal court on the same day, requesting to block the merger of Kroger and Albertsons based on antitrust laws. Henry Liu, Director of the FTC’s Bureau of Competition, stated, "The merger of these supermarket giants comes amid steadily rising grocery prices over recent years," adding, "Kroger’s acquisition of Albertsons will lead to additional price hikes, worsening the financial burden faced by consumers across the U.S. today."

Earlier, Kroger and Albertsons publicly announced plans to alleviate monopoly concerns by closing hundreds of stores in certain states such as Washington and Colorado after the merger. However, the FTC pointed out that these plans would not address the fundamental concerns. Kroger and Albertsons are the first and second largest supermarket chains in the U.S. by sales. Headquartered in Cincinnati, Kroger operates more than 2,700 stores nationwide, including regional chains. Albertsons, which includes Safeway merged in 2015, operates a total of 2,300 stores.

The two companies announced their acquisition agreement in 2022. The deal, valued at approximately $25 billion, is a blockbuster by all means. It was expected that the merged company could enhance its competitiveness against major U.S. retailers such as Walmart and Costco. However, local labor unions opposed the deal due to concerns over workforce restructuring, and many analysts predicted it would be difficult to clear antitrust regulators. Under the Biden administration, the FTC and the Department of Justice have been blocking large-scale M&As such as Microsoft’s acquisition of Activision Blizzard and JetBlue’s acquisition of Spirit Airlines.

In particular, Kroger and Albertsons have significant overlap in their operating regions, including Southern California, Colorado, Washington, Texas, and Chicago, leading to analyses that the merger synergy effect would be low. The attorneys general of Washington and Colorado have already filed lawsuits to stop the acquisition. WSJ reported that nine states, including California, joined the FTC’s lawsuit on the same day. Some lawmakers, including Democratic Senator Elizabeth Warren, also previously expressed opposition to the acquisition to the FTC.

On the other hand, the two companies argue that the acquisition will accelerate competition with Walmart, Costco, and others, ultimately providing consumers with lower prices. Kroger explained that after completing the acquisition, it plans to spend a total of $500 million on price reductions and $1.3 billion on improving Albertsons stores.

Meanwhile, as the New York Stock Exchange approached the close on the same day, Kroger’s stock was trading down more than 1.7% compared to the previous session. Albertsons’ stock showed a slight gain.

This content was produced with the assistance of AI translation services.