Organized Labor Behind FTC’s Decision to Block Kroger/Albertsons Merger

What if two of the country’s largest grocery chains could merge with no store closures or job losses, offer better prices to consumers, higher wages for the employees, and promise that customers won’t even notice? That’s the deal promised between Kroger and Albertson’s with C&S Wholesale Grocers to sell 579 stores and eight distribution centers across 17 states. But the Federal Trade Commission and 11 states Attorneys General are suing to stop the merger.

In September, Kroger and Albertson’s announced that they entered into a $1.9 billion definitive agreement with C&S Wholesale Grocers, in connection with the supermarkets’ proposed $24.6 billion merger.

“But everybody who’s been paying attention to the way Americans eat should agree that the FTC’s lawsuit to block the deal is ridiculous,” Michael L. Davis, an economics professor at the Cox School of Business, SMU Dallas, wrote. “Kroger and Albertson’s aren’t in the business of selling groceries, at least in the way we used to think of as the business selling groceries.”

Davis said Kroger and Albertson’s are increasingly in the business of “meal solutions.” “That means Kroger, and Albertson’s don’t just compete against each other (and Walmart, and Whole Foods, and Target, and regional grocery store chains and delivery services, and …..). They’re competing against fast food places, take out places and casual dining.” He says if you’re a typical American, you’re spending less time in the kitchen than ever, and Kroger and Albertson’s recognize this and are trying to adjust to how and why the grocery business has changed.

Kroger and Albertson’s are the two largest grocery employers of union labor in the United States, with most workers members of the United Food and Commercial Workers (UFCW) union. Kroger is the largest traditional supermarket chain and the largest employer of union grocery workers in the United States. Albertsons is the second largest traditional supermarket chain and the second largest employer of union grocery workers in the United States.

In California, all retail is suffering under never-before levels of serial theft. Grocery stores are being robbed blind, and have been forced to hire private security on site, as well as locking up aisles of products. Yet, this additional cost to the thin profits is what is driving mergers.

The Globe reported, “The proposed merger between Kroger and Albertson’s was first announced in October 2022. The deal, worth $24.6 billion, would formally create a grocery chain of nearly 5,000 stores. While there were many reasons behind the merger, the need for both Kroger and Albertson’s to expand online because of increased competition from large companies such as Walmart and Amazon was shown to be the primary concern.”

“In addition to [AG] Bonta, 10 other states have urged [FTC’s] Khan not to go along with the deal because of similar concerns. Several unions, such as the United Food and Commercial Workers union, have also joined them in opposition against the merger.”

Yet the FTC says Kroger and Albertson’s are not grocers like Walmart and Target.

The proposed merger only puts C&S at the #12 grocer in US grocery sales.

The Federal Trade Commission announced in late February it filed a lawsuit to block the Kroger Company’s $24.6 billion acquisition of the Albertson’s Companies, Inc., alleging that the deal is anticompetitive, the Globe reported. The merger is the largest proposed supermarket merger in U.S. history, the FTC claims.

The “Largest supermarket merger in U.S. history will eliminate competition and raise grocery prices for millions of Americans, while harming tens of thousands of workers,” the FTC said.

The FTC charged that the proposed deal will eliminate fierce competition between Kroger and Albertson’s, leading to higher grocery prices, diminished quality products, fewer product choices, fewer in-store services, as well as the loss of competition, as they are head-to-head competitors.

Yet, large wholesale foundation brings significant operational benefits to retail stores, just like SpartanNash, another multi-billion sales hybrid operator (publicly-traded – SPTN) which owns and operates 10 retail banners across 9 states; C&S will be #8 U.S. grocer by total sales (retail + wholesale), C&S reported.

GroceryDive.com reported that C&S supplies more than 7,500 independent supermarkets, chain stores, military bases and institutions with over 100,000 different products.

So what’s the real beef underlying the FTC and state Attorneys General have with the merger?

“The concern from the first half of the complaint is that the merger will allow the combined company to raise prices and harm consumers. But the concern from the second half of the complaint is that the merger will make it harder for unions to shake down grocery stores for bigger compensation packages and go on strike — which would raise prices and harm consumers,” National Review reported. “Most unionized Kroger and Albertson’s employees are members of the United Food and Commercial Workers International Union (UFCW). The UFCW opposes the Kroger/Albertson’s merger.”

“The UFCW has about 1.2 million members. Despite losing 106,000 members between 2014 and 2022, its net assets have increased from $199 million to $521 million in that same span.”

Assemblyman Bill Essayli (R-Riverside), wrote in a January op ed in the Orange County Register:

“California Attorney General Rob Bonta claims to be a champion of consumer interests, often spouting rhetoric about protecting vulnerable communities. However, his recent intention to sue over the Albertson’s-Kroger merger raises new questions about his priorities. In recent news coverage of the proposed merger, Bonta expressed concerns about speculative price hikes and labor issues resulting from the merger. However, Kroger itself has committed to lowering prices for customers and protecting each entity’s unionized workforce.

Unsurprisingly, the Attorney General disregards the merger’s potential benefits to customers, employees, and California’s economy. The $500 million investment in lowering prices could directly benefit consumers, particularly those facing economic challenges. Lowering prices on essential goods, such as groceries, can alleviate financial burdens on households, especially those with lower incomes.”

Indeed.

As National Review concluded, FTC “Chairwoman Lina Khan has attempted a progressive takeover of the FTC that has spurred the departure of numerous career staffers and yielded poor results in court. The illogic of the FTC’s complaint, combined with the obvious fact that the UFCW is part of the Democrats’ political coalition, ought to raise questions about why the Kroger/Albertson’s merger is really being held up. The FTC’s job is to protect consumers, not organized labor.”

“But whatever happens, it isn’t going to change the transformation that’s already swept the business of eating,” economist Davis said. “Kroger is trying to adjust. The FTC is trying to obstruct.”