If Kroger and Albertsons merge, will consumers lose?

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SALT LAKE CITY — Two of the country's largest grocery chains, Kroger and Albertsons, took care of the easy part of a possible merger last week: announcing a deal worth almost $25 billion that, should it come to fruition, would combine the two brands into a new, 5,000-store retail behemoth that would dwarf all competitors except the nation's undisputed king of discount food and sundries, Walmart.

The hard part, however, is yet to come.

That is convincing federal regulators that the deal, one in which Kroger is offering to buy out Albertsons for $20 billion and assume almost $5 billion in outstanding debt, doesn't lead to further abuse of consumers who have been, and continue to be, battered by ongoing record high inflation.

While Kroger and Albertsons claim the merger will save them hundreds of millions of dollars and lead to better deals for shoppers, plenty of industry watchers and consumer advocates are crying foul and calling for intervention based on federal antitrust rules. And, the outrage is uniting some partisan voices that typically find little else to agree on.

Sens. Bernie Sanders and Mike Lee, together

Amid a historically broad partisan divide that has brought meaningful, collaborative federal lawmaking to a functional standstill, there's been one issue over the past several years with proven power to bring the red and blue teams together, at least in a philosophical sense: limiting corporate power.

Democrats and Republicans have found common ground in the effort to find ways to reign in the market power of some U.S. tech giants and word of a potential Kroger-Albertsons fusion sparked critical commentary from both sides of the political spectrum.

In a tweet last week, Vermont's progressive Sen. Bernie Sanders said the deal was a corporate money grab and called on the White House to intervene on behalf of consumers.

"At a time when food prices are soaring as a result of corporate greed, it would be an absolute disaster to allow Kroger, the 2nd largest grocery store in America, to merge with Albertsons, the 4th largest grocery store in America," the Vermont progressive wrote. "The Biden Administration must reject this deal."

A day later, Utah conservative Sen. Mike Lee, who has called for tougher antitrust oversight and a reworking of agencies that enforce those rules as the ranking Republican on the U.S. Senate's antitrust panel, raised concerns about how the deal might impact shoppers already struggling to cover the costs inflation-driven price hikes have put on basic necessities.

"Utahns, like all Americans, are suffering from skyrocketing food prices," Lee said in a statement. "As the senior Republican member of the Senate Antitrust Subcommittee, I will do everything in my power to ensure our antitrust laws are robustly enforced to protect consumers from anticompetitive mergers that could further exacerbate the financial strain we already feel in the grocery store checkout aisle."

Consumers and smaller grocers could take a hit

The National Grocers Association, advocates for smaller grocery store operators in the U.S., said the Kroger-Albertsons merger, should it happen, would be unfair to both the smaller chains and consumers.

"A merger of the nation's top two grocery chains should raise serious questions about a single supermarket giant gaining unprecedented dominance over the nation's food supply chain," said Greg Ferrara, NGA president and CEO, in a statement. "A merger would not only put smaller competitors at an unfair disadvantage, but also increase anticompetitive buyer power over grocery suppliers, which ultimately would harm consumers. It is our expectation that this deal will receive rigorous scrutiny from federal antitrust enforcers."

Nonprofit anti-monopoly group American Economic Liberties Project said that consolidation in the U.S. grocery sector has long been an issue and noted that over 60% of American grocery sales are estimated to be concentrated among just five operators: Walmart, Kroger, Amazon, Albertsons and Ahold Delhaize.

"There is no reason to allow two of the biggest supermarket chains in the country to merge — especially with food prices already soaring," Sarah Miller, executive director of the American Economic Liberties Project, said in a statement. "With 60% of grocery sales concentrated among just five national chains, a Kroger-Albertsons deal would squeeze consumers already struggling to afford food, crush workers fighting for fair wages, and destroy independent, community stores. This merger is a cut-and-dry case of monopoly power, and enforcers should block it."

What's next for the Kroger-Albertsons deal

Lee wants to see a single U.S. federal agency tasked with overseeing and enforcing anti-monopoly rules but for now the U.S. Department of Justice and Federal Trade Commission share the responsibility. The FTC devotes most of its resources focused on sectors where consumer spending is high, including food businesses.

According to a report by The New York Times, the FTC will most likely look at claims Kroger and Albertsons have made in previous acquisition deals — and whether they have followed through on them. It will also look intently at whether Kroger and Albertsons can leave room for a viable competitor in markets in which they overlap by selling off stores. The track record of such efforts is rocky. Smaller competitors do not always have the means to expand into those markets, and the companies selling those stores may not truly want a new viable competitor.

Per the Times, it is unclear if the FTC or another agency will try to stop the deal. But in an attempt to do so, a regulator can sue to block the merger, forcing companies to decide whether they want to pursue the long and costly process of a trial to prove it is better for them, their shareholders and their customers to combine. Sometimes, they walk away to avoid that hassle.

Pending regulatory approval, the deal could close in 2024, according to the two companies involved.