The Biden administration has initiated legal proceedings to impede the proposed merger of supermarket chains Kroger and Albertsons, asserting that the transaction would result in increased consumer food prices.
Monday, the Federal Trade Commission published a press release on its website announcing the lawsuit, according to a report by NBC News.
"The FTC charges that the proposed deal will eliminate fierce competition between Kroger and Albertsons, leading to higher prices for groceries and other essential household items for millions of Americans," it said. "The loss of competition will also lead to lower quality products and services, while also narrowing consumers’ choices for where to shop for groceries."
The cost of food for Americans has increased by over 20% since the pandemic began, although there has been a recent slight alleviation of this pressure.
U.S. consumers spent an average of 11.3% of their disposable income on food in 2022, according to the USDA. This is comparable to the 1980s, albeit a lot of the rise was caused by substantial gains in food consumed outside of home.
The proposed $25 billion transaction was initially unveiled in December 2022 by Kroger and Albertson's, the nation's second- and fourth-largest grocers, respectively, after Costco and Walmart. The assumption was that the chains would operate in differing regions of the nation.
If everything goes according to plan, the merger would have created a corporation with 710,000 employees running about 5,000 retail locations and 4,000 pharmacies.
However, the FTC said in its lawsuit that as a result of the merger's potential elimination of competition, worker pay could become less competitive.
“This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years," said Henry Liu, Director of the FTC’s Bureau of Competition, in the release.
"Kroger’s acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today.
“Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating.”
Kroger criticized the Biden administration's suit in a statement released after news that the merger wouldn't go through.
"Contrary to the FTC’s statements, blocking Kroger’s merger with Albertsons Companies will actually harm the very people the FTC purports to serve: America’s consumers and workers," the company said.
A spokesperson for Albertsons issued a statement along the same thread, saying the proposed merger would "expand competition, lower prices, increase associate wages, protect union jobs, and enhance customers shopping experience."
"If the Federal Trade Commission is successful in blocking this merger, it would be hurting customers and helping strengthen larger, multi-channel retailers such as Amazon, Walmart and Costco — the very companies the FTC claims to be reining in — by allowing them to continue increasing their growing dominance of the grocery industry."
