The government’s lawsuit against Kroger and Albertsons defines a supermarket, calls the two, “serial” acquirers and illustrates union representation’s impact on the grocers’ workers.
Kroger and Albertsons many times before have made major acquisitions, but this time antitrust regulators are saying, stop.
The lawsuit filed this week by the Federal Trade Commission and nine attorneys general showed how far apart the government and the companies are in their opposition and support of the $24.6 billion deal that would be the largest merger in U.S. supermarket history.
‘Serial acquisitions’
The government’s lawsuit describes Kroger and Albertsons as “products of serial acquisitions” and it objects to this final big one between the number one and number supermarket chains in the U.S. Since 1983, between the two of them, they’ve acquired nearly three dozen grocery store banners in addition to their namesake stores: 19 for Kroger and 15 for Albertsons.
In Texas, Kroger has purchased stores but has largely grown organically under its namesake brand.
Albertsons increased its presence in the state in 2013 when it purchased United Supermarkets in Lubbock which gave it United, Market Street and Amigos. That was followed by the acquisition in 2015 of California-based Safeway which gave it Tom Thumb and Randalls in Texas.
Little chance of success
Kroger heralded C&S Wholesale Grocers as a strong acquirer of 413 stores in 17 states including Texas to satisfy antitrust review. Kroger said C&S will “successfully operate and continue to grow these iconic brands for years to come.”
The FTC said that Kroger and Albertsons structured the sale to C&S with assets that are insufficient to operate a supermarket business that substantially replaces Kroger or Albertsons. Stores sold would be in markets where Kroger and Albertsons overlap.
In the case of Dallas-Fort Worth, the divested stores when separated from the 200 stores now operated by the combined robust operations of Kroger and Albertsons, which includes Tom Thumb and Albertsons, will have little chance of success, the FTC is saying.
No risk from spin-off for grocery giant
The success of those stores won’t be Kroger’s problem, the FTC said. It’s not Kroger and Albertsons who would bear the risk of the failure of C&S Wholesale to operate stores successfully, the FTC lawsuit said. Customers would lose their neighborhood stores, the FTC said. “The American public— not Defendants — would bear the costs of any failure.”
Local vs. national competitors
Kroger and Albertsons define their competition at the national level, saying that the FTC’s decision “only strengthens larger, non-unionized retailers like Walmart, Costco and Amazon by allowing them to further increase their overwhelming and growing dominance in the grocery industry.”
The FTC is looking at the two supermarket chains on the local level and as convenient stores where customers can purchase most or all of the food and grocery shopping requirements including pharmacy, floral and often gasoline.
The regulators highlighted the differences in the customer experience of other places to buy groceries — limited assortment stores such as Aldi, Lidl and organic stores such as Whole Foods and Sprouts — trying to show that they aren’t substitutions for a traditional supermarket.
Wholesale clubs have membership fees, larger size packages, rotating products, fewer items than a supermarket and operate fewer stores in a market requiring shoppers to drive greater distances.
Amazon and the online grocery experience is different from the in-store experience as shoppers can’t inspect produce before purchasing, have to plan for delivery or pickup and are charged fees which increase the total cost of a grocery basket.
Workers could be short-changed
The FTC’s lawsuit illustrates how the merger would eliminate competition for workers between Kroger and Albertsons. Kroger employs 430,000 workers who are covered by more than 300 collective bargaining agreements with labor unions in 30 states. Albertsons has more than 290,000 workers, most covered by unions in 26 states. States where both Kroger and Albertsons employ union grocery workers are Alaska, Arizona, California, Colorado, Idaho, Illinois, Indiana, Montana, New Mexico, Nevada, Oregon, Utah, Virginia, Washington, and Wyoming.
Unions can leverage the fact that they are separate companies to negotiate better terms for workers.
The lawsuit cited the United Food and Commercial Workers Local 7 strike in 2022 against Kroger’s King Soopers supermarkets in the Denver area. Striking Kroger workers encouraged customers to transfer their prescriptions to Albertsons stores. The strike ended with Kroger agreeing to higher wages and safety protections for its workers. The UFCW local took the Kroger agreement to Albertsons which agreed to the same wages and terms.
“UFCW Local 7 was able to improve the terms of its CBAs with both employers, leading to improved wages and benefits for thousands of their members,” the lawsuit said.
©2024 The Dallas Morning News. Distributed by Tribune Content Agency, LLC.
