After 16 months of investigation and public hearings, the Federal Trade Commission (FTC) filed suit Feb. 26 in U.S. District Court in Portland to block Kroger’s proposed $24.6 billion acquisition of Albertsons.
Kroger is the nation’s biggest grocery company, and Albertsons is the second-biggest. Between the two of them, they own almost four dozen regional and national grocery brands, including Fred Meyer, Safeway, Albertsons, QFC, and Haggen in the Pacific Northwest. A Kroger-Albertsons combo would be the largest supermarket merger in U.S. history, resulting in a grocery Goliath with 5,000 stories, roughly 4,000 retail pharmacies, and nearly 700,000 employees.
The FTC says the merger would violate U.S. antitrust laws, which are meant to prevent anticompetitive mergers and monopolies. Announcing its lawsuit, the FTC said a merger of Kroger and Albertsons would lead to higher prices for groceries, fewer consumer choices, and lower quality products and services. By erasing labor market competition, it would also threaten workers’ ability to secure better wages, benefits, and working conditions.
“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”
Henry Liu, director of the FTC’s Bureau of Competition
“Today, Kroger and Albertsons compete aggressively with one another to hire and retain grocery workers, principally through collective bargaining negotiations with local unions,” the FTC says in its lawsuit. “This competition has resulted in higher wages, better benefits, and improved working conditions for employees. The proposed acquisition would eliminate this competition, threatening the ability of hundreds of thousands of grocery store workers to secure stronger contracts with improved wages and benefits.”
Kroger and Albertsons say the FTC got it all wrong. Blocking the merger “will actually harm the very people the FTC purports to serve: America’s consumers and workers,” said Kroger in a press statement, which also claimed Kroger has reduced prices every year since 2003. A statement released by Albertsons said the merger would “expand competition, lower prices, increase associate wages, protect union jobs, and enhance customers’ shopping experience.”
‘A hodgepodge of stores’
In a press statement explaining the legal action, Henry Liu, director of the FTC’s Bureau of Competition, said consumers have already seen the cost of groceries rise steadily.
“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,” Liu said. “Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating.”
Hoping to win FTC approval of the merger, Kroger and Albertsons proposed to sell several hundred stores around the country to C&S Wholesale Grocers, a New Hampshire company that operates a wholesale network in 16 states, plus 23 retail supermarkets, mostly in New York and Wisconsin. In its announcement, FTC referred to the Kroger and Albertsons divestiture proposal as “a hodgepodge of unconnected stores, banners, brands, and other assets that Kroger’s antitrust lawyers have cobbled together.”
“C&S would face significant obstacles stitching together the various parts and pieces from Kroger and Albertsons into a functioning business — let alone a successful competitor against a combined Kroger and Albertsons,” the FTC said.
Most workers at stores owned by Kroger and Albertsons are members of the United Food and Commercial Workers (UFCW). In the Portland area, the companies employ members of UFCW Local 555, Bakers Local 114, and four Teamsters locals.
Right now grocery unions leverage the fact that Kroger and Albertsons are separate and competing companies, the FTC said, but the combined Kroger and Albertsons “would have more leverage to impose subpar terms on union grocery workers that slow improvements to wages, worsen benefits, and potentially degrade working conditions.”
A coalition of seven UFCW locals representing more than 100,000 Kroger and Albertsons workers in a dozen states has been campaigning against the merger since it was announced in October 2022. The group is led by UFCW Local 3000 in Seattle. Over 100 other organizations have endorsed the coalition’s “Stop the Merger” campaign, including more than two dozen other labor organizations. The UFCW international union also opposes the merger, in accordance with a resolution passed unanimously at its 2023 convention. So does the International Brotherhood of Teamsters, which represents 22,000 workers at Kroger and Albertsons companies around the country. The Oregon AFL-CIO opposes the merger as well, following a 2023 convention resolution sponsored by Tigard-based UFCW Local 555.
Oregon’s UFCW Local 555 becomes sole union to endorse the merger
But UFCW Local 555 itself reversed course and on Feb. 19 announced that after meeting with some leaders of C&S, it supports the merger.
“We were pleased to find not only that (C&S) understood and liked the grocery business, but also recognized the importance of quality employees to their ongoing success,” Local 555 President Dan Clay said in a press release announcing the union’s support for the merger. “C&S has the opportunity to bring a long-term strategy to a grocery industry focused on the short-term demands of shareholders and private equity investors. Employees of Kroger and C&S will be better off than employees of other potential buyers whose actions never seem to match the image they project publicly. In a refreshing change of pace, C&S seems poised to deliver a much needed fresh perspective for employees and customers alike.”
That assessment of C&S runs counter to the experience of the Teamsters union, which has called on the FTC to reject C&S as a buyer.
“C&S has driven one grocery business after another into the ground for 30 years,” said Teamsters Warehouse Division Director Tom Erickson in a Dec. 11 press statement. “This anti-union company has just one playbook when it comes to acquiring Teamster companies or grocery distribution contracts where our members work: close it down, bail on pensions, and move the work to one of their non-union sites.”
And the FTC points out in its lawsuit that as late as 2021, C&S was stating in its quarterly reports that it did not intend to operate retail grocery stores in the long term.
Local 555 spokesperson Miles Eshaia declined to share the names of the C&S executives who met with Local 555’s leadership team. But C&S or no, Eshaia said a big reason Local 555 decided to support the merger is that Albertsons’ current majority owner is Cerberus Capital Management, a private equity firm. Eshaia said if Cerberus doesn’t sell to Kroger, it would surely sell to some other company, like a big box retailer, Amazon, or an overseas investor.
“If it doesn’t go through, who is Cerberus going to sell to? That’s the dangerous part,” Eshaia said. “If the merger is blocked, it WILL go to someone else, and be someone else that is not a good option for workers and definitely not a good option for consumers.” That analysis seems to assume FTC would allow the second largest grocer to combine with another major grocery player.
Nine attorneys general are joining the FTC in its federal lawsuit: California, Arizona, Illinois, Maryland, Nevada, New Mexico, Wyoming, and Washington, D.C., and Oregon.
Eshaia expressed irritation that Oregon Attorney General Ellen Rosenblum joined the FTC suit to block the merger without consulting Local 555 first. He said Rosenblum had canceled a meeting with Local 555 leaders that was scheduled to take place Feb. 17, the day after the FTC lawsuit was filed.
“It would have been nice to her to actually talk to the union that represents the workers that she’s filing a lawsuit on behalf of.” Eshaia said.
Washington and Colorado attorneys general file their own anti-merger suits
Meanwhile, attorneys general in Washington state and Colorado earlier filed their own independent lawsuits to block the merger.
Washington Attorney General Bob Ferguson was the first to go to court, on Jan. 15, 2024. His lawsuit seeks to block the merger under the Consumer Protection Act, a Washington law that bars unfair methods of competition. The lawsuit refers to numerous internal documents at Kroger, Albertsons, and C&S uncovered during the antitrust investigation that contradict the companies’ public statements. For example, Kroger executives discussed strategically “closing” unionized stores “for a period of time to make them non-union.” And at C&S, a former CEO voiced discomfort about publicly saying that C&S wouldn’t close stores once they acquired them.
In fact, C&S has a history of closing unionized stores and shifting operations to non-union stores, the lawsuit says. C&S closed unionized warehouses in Maine, Massachusetts, and Rhode Island within a year of acquiring them and transferred the jobs to non-union facilities elsewhere. C&S also acquired two unionized Safeway warehouses in Maryland and swiftly closed them, again transferring jobs to non-union warehouses.
The lawsuit filed by Colorado Attorney General Philip Weiser is even more explosive, citing evidence that the two companies have already illegally colluded to suppress wages and competition. In January 2022, grocery union members went on strike at 78 Colorado locations of King Soopers, a Kroger subsidiary. According to a complaint Weiser filed on Feb. 14, 2024, the companies agreed that for the duration of the strike, Albertsons wouldn’t hire striking King Soopers employees or solicit King Soopers pharmacy customers. The pledge was spelled out explicitly in an email from the Albertsons executive in charge of labor relations to his counterpart at Kroger, and it was widely known to top executives at both companies, according to the lawsuit. In addition to blocking the merger, Weiser is seeking to fine each firm $1 million for that agreement.
Based on the revelations in the lawsuit, Colorado-based UFCW Local 7 filed charges against the two companies with the National Labor Relations Board, saying those actions violated federal labor law.
Kroger and Albertsons didn’t become the giants they are today because they had better prices and quality than their competitors. They got that big because over the last four decades the government allowed them to buy their competitors. But the FTC has been returning to its anti-monopoly roots since President Joe Biden appointed Lina Khan as chair. Its suit to stop the Kroger-Albertsons merger — one of the biggest tests yet of the FTC’s renewed commitment to antitrust enforcement — will play out over the coming months in federal court in Portland.
