What the Kroger-Albertsons Merger Means for Your Grocery Bill

As inflation and grocery prices remain central issues in the upcoming November election, the Federal Trade Commission (FTC) has kicked off a trial to block a merger between the two largest traditional supermarket chains in the U.S.
On Monday, Kroger and Albertsons defended their $25 billion merger plan in a federal court hearing in Oregon, where they tried to overcome the U.S. government’s objections.
The two companies proposed what would be the largest supermarket merger in history, arguing that it would help them reduce costs and better compete with big rivals like Walmart and Costco.
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Consumer prices, particularly those related to food and housing, have become a political football in the 2024 presidential campaign. Vice President Kamala Harris has called for a ban on price gouging in the food and grocery sectors, though critics and experts have questioned the effectiveness of such a policy.
The FTC sued to block the deal, claiming it would eliminate competition and raise grocery prices amid already high food price inflation. During the three-week hearing that began Monday, the FTC is seeking a preliminary injunction to block the deal while its complaint goes before an in-house administrative law judge.
“This lawsuit is part of an effort aimed at helping Americans feed their families,” said the FTC’s chief trial counsel, Susan Musser, in her opening arguments.
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The proposed merger, announced nearly two years ago, is the largest in U.S. supermarket history. Kroger and Albertsons, two of the nation’s largest grocery chains, aim to create a massive combined entity operating over 4,000 stores across the country.
Proponents argue that the merger will help the companies compete with retail giants like Walmart, which now controls around 22% of U.S. grocery sales. Combined, Kroger and Albertsons would control around 13%.
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Antitrust regulators argue that the merger would eliminate competition, leading to higher prices, poorer quality, and lower wages and benefits for workers. In February, the FTC issued a complaint seeking to block the merger before an administrative judge. Simultaneously, the FTC filed a lawsuit in federal court in Oregon seeking a preliminary injunction. Attorneys general from Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming have joined the federal lawsuit.
There are differing opinions. Kroger has pledged to cut grocery prices by $1 billion if the merger is approved, doubling its previous commitment of $500 million. However, the FTC and some industry experts are skeptical of such promises.
“In the case of grocery prices, market concentration is a problem. When chains merge, it can create long-lasting pressure on prices and a possibility of explicit or tacit collusion,” Luis Cabral, a professor of economics at New York University, told Newsweek.
“High levels of corporate concentration make it easier to price gouge. When there are only a small number of players, it is much easier to collude, and even short of collusion, it is easier to predict competitors’ actions,” said Isabella Weber, an associate professor of economics at the University of Massachusetts Amherst.
The potential impact of the Kroger-Albertsons merger on grocery prices is complex and may vary depending on where consumers live. In markets where the two companies currently compete, reduced competition could lead to higher prices. However, in regions with other strong competitors, such as Walmart or regional grocery chains, the effect might be less pronounced.
John Mayo, Executive Director of the Center for Business and Public Policy at Georgetown University, noted that in markets with few competitors, grocery mergers often lead to higher prices, while in more competitive areas, costs have fallen after major mergers.
“In large cities such as New York, Philadelphia, and San Francisco, which have an abundance of competitors, grocery store mergers have been found to reduce prices. However, in smaller communities such as Fort Smith, Arkansas, Muskogee, Oklahoma, and Topeka, Kansas, with fewer competitors, grocery mergers have led to higher prices,” he said.
Kroger and Albertsons say no. If the merger is approved, they have agreed to sell 579 stores in areas where their stores overlap. The buyer would be C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly store brands.
Initially, Kroger and Albertsons planned to divest 413 stores, but the FTC argued that plan wouldn’t allow C&S to be a robust competitor. As a result, Kroger and Albertsons agreed to divest additional stores in April. Washington would see the most stores divested, with 124, followed by Colorado with 91 and California with 63.
The FTC would likely appeal the ruling, but it’s rare for an appeals court to reverse a lower court’s ruling on a merger, so the FTC might drop the challenge. The case could still proceed through the FTC’s administrative process. The impact of the presidential election on the case remains unclear. The Biden administration has been particularly aggressive in challenging mergers it considers anti-competitive, though lawmakers from both parties expressed skepticism about the merger during a 2022 hearing.
Colorado and Washington have separately sued to block the merger in state courts, an unusual move as states typically act as co-plaintiffs in federal lawsuits. Both states believe they have much at stake—Colorado has more than 200 Kroger and Albertsons stores, while Washington has more than 300. Both states could seek their own injunctions if the FTC loses, but it would be surprising for another court to block the merger if Kroger and Albertsons are successful in federal court.
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