Attorney General Phil Weiser should leave no stone unturned as he works to protect Colorado consumers and employees from the ramifications of a $24.6 billion merger between two of the nation’s largest grocers – Kroger and Albertsons.
Weiser began digging in on the issue months before the Federal Trade Commission announced charges that the proposed acquisition is anticompetitive and would harm customers and employees. Weiser’s lawsuit is asking a judge to rule that the merger violates Colorado laws against intentionally undermining competition and to prevent the merger from going forward.
We are glad this scrutiny is moving on multiple tracks.
Coloradans have much to lose if this merger is allowed to go forward without substantial protections built in to guarantee that wages won’t be depressed, that food prices won’t soar, and that residents in communities big and small maintain reliable access to a wide variety of food products.
Weiser’s investigation determined that, combined, Kroger and Albertsons would own about 50% of the supermarkets in Colorado. The lawsuit meticulously breaks down the little competition that would remain for shoppers that doesn’t meet the “supermarket” definition – dollar stores, which offer low prices but little inventory for fresh produce or perishable foods; hypermarkets like super Walmarts and Targets; and club stores like Sam’s Club and Costco. Finally, there are specialty grocers like Whole Foods owned by Amazon, Natural Grocers, and Sprouts.
The CEOs of Albertsons and Kroger told The Denver Post last year that the merger is essential so their stores can compete with Walmart and Amazon, which have enormous distribution chains and are reaching economies of scale that make it difficult to compete on price. We agree it would be dire for consumers if Walmart and Amazon were to put traditional grocery stores out of business. Local producers would suffer whether they are farmers, ranchers or brewers looking to offer their products on the shelves of their community stores rather than through a national distribution chain.
“No frontline associate will lose their job,” Kroger CEO Rodney McMullen assured The Denver Post in July. “In my whole life, I’ve never ever thought about how to raise a price.”
Weiser told us he doesn’t believe that either Albertsons or Kroger are at risk of financial hardship. He noted that Albertsons paid out $4 billion to shareholders in 2022 as the merger was already underway. Weiser unsuccessfully sued to prevent the payout, concerned it could falsely allow Albertsons to claim poverty as the merger was moving forward.
“We were told the company is thriving. They said, ‘We are doing this because we are so secure,’ ” Weiser said. “That argument is deeply problematic.”
Colorado’s case seems particularly strong because Albertsons and Safeway stores compete head- to-head with the Kroger brands King Soopers and City Market in so many neighborhoods, cities and counties. If competition is greatly reduced in these communities, prices will rise, and sales and deals will subside.
The Federal Trade Commission announced a lawsuit last month that considers the merger across the nation to be anticompetitive. The merger would put Kroger in charge of 13% of the U.S. grocery market, while Walmart controls 22%. But those statistics hide the impact on states like Colorado, where the market share is already heavily concentrated by these two brands.
We are glad Weiser is pursuing his own case. The impact in Colorado will be felt much more than in other parts of the nation, and it is possible that if the FTC does not prevail in its lawsuit, Colorado’s judges could rule in a way limited to the impacts in this state.
Part of the merger agreement does address markets where the merger would result in monopolistic conditions for the grocers. Kroger agreed to sell off a number of stores to a third-party company that would then run and manage the competition.
Colorado has been down this road before when Albertsons merged with Safeway. The result was that the spin-off company faltered, and businesses were shuttered despite promises that competition would remain.
If federal and state courts allow the merger to go forward, we hope great scrutiny will be given to the company selected to operate stores Kroger is forced to sell. A far better outcome than Kroger’s current proposal would be to bring in a successful out-of-state competitor like Publix, Winn-Dixie or HEB to run the stores Kroger sells.
Weiser is not just looking to protect consumers; he is also worried about the effect a merger would have on employees. His lawsuit includes charges that during an employee strike, Kroger and Albertsons entered into a non-poach agreement for employees. Weiser said emails discussing the agreement were found during the discovery investigation for the antitrust lawsuit into the merger.
Spokespeople for both Kroger and Albertsons have denied that such an agreement exists.
But who needs an agreement to prevent employees from shopping around for higher wages and better benefits when you can just merge the companies?
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