Washington, D.C. — Following closing arguments in the Federal Trade Commission’s court challenge to the $24 billion Kroger-Albertsons merger—the largest supermarket merger in history—the American Economic Liberties Project released the following statement summarizing the hearing’s key points.

“On the stand, Kroger’s CEO admitted that his promises about the merger’s supposed benefits are not legally enforceable. That just about sums up this hearing, where hard evidence definitively contradicted the merging parties’ PR offensive,” said Laurel Kilgour, Research Manager at the American Economic Liberties Project. “Kroger claims to be committed to passing on savings to customers, but admitted in court to price gouging shoppers during the pandemic. Kroger claims divestiture partner C&S is a strong competitor, but C&S has a track record of running retail stores into the ground. Kroger claims the merger will not result in store closures, but Kroger’s CEO admitted that the merged Kroger/Albertsons could change their mind and close stores at any time– and C&S testified that Kroger is offloading its ‘worst chains’ through the divestiture. Kroger claims Walmart is its main competitive threat, but testimony revealed that Kroger and Albertsons are head-to-head competitors who closely monitor each others’ pricing.”

“Quite simply, the hearing confirmed our worst fears: this merger is bad news for Americans’ grocery bills and thousands of grocery workers’ livelihoods, and Judge Nelson should grant the FTC’s motion to pause the merger.” Kilgour added.

Economic Liberties attended opening arguments and several days of witness testimony, and has reviewed daily transcripts of the hearing. The main takeaways:

• Kroger executives admitted to price-gouging during the pandemic. Kroger Director of Retail Insight & Strategy Andrew Groff admitted on the stand that Kroger deliberately hiked prices on everyday essentials such as milk and eggs above cost increases from inflation. This price-gouging generated record profits.
• After previous mergers, Kroger and Albertsons never made promised investments in lowering prices. To appease worried customers, Kroger has pledged to invest $1 billion in lowering prices at Albertsons following this merger—a goodwill gesture both companies have repeatedly made during past acquisitions of rivals. But economics and finance expert Aaron Yeater testified that following Kroger’s 2014-15 acquisitions of Harris Teeter and Roundy’s, “promised or expected price investments had not been made.”
• The merger is motivated by paydays for corporate executives and private equity barons. Albertsons CEO and COO testified that they will each receive tens of millions of dollars in golden parachutes if the deal goes through. The COO also testified that a private equity firm on Albertsons’ board pushed Albertsons to put itself up for sale, and will receive massive payouts from any deal.
• Kroger and Albertsons are “primary” competitors with each other and charge more in areas without strong competition. Kroger and Albertsons hold significant market shares in numerous regions across the United States. A merger would decrease access to groceries for thousands of communities. Both supermarkets change or hold prices in response to what the other does and refer to each other as “primary” competitors in internal documents. They price-check each other on everyday essentials far more frequently than any other grocery store.
  • The competitive intensity between these giant chains is also reflected by Kroger’s choice not to end their price-gouging when their own costs decreased, or even a month after Walmart lowered its prices. Instead, Kroger waited until Albertsons lowered its prices to finally ease off its price-gouging. Kroger looks to Albertsons for a “price ceiling.”
  • On cross-examination, Kroger CEO Rodney McMullen admitted that Albertsons is Kroger’s number one or number two competitor in 14 out of 17 major metro areas.
  • Kroger executive Andrew Groff also admitted that Kroger charged higher prices in what it called a “no-comp[etition] or low-comp[etition] zone in Western Colorado.”
  • This testimony confirms that Kroger and Albertsons are head-to-head competitors and that combining these two giants into one would increase prices for consumers in regions where these corporations compete.
• Union leaders testified that competition is essential for good jobs. A merged company means decreased mobility in the job market. Throughout the hearing, various United Food and Commercial Workers Local Union leaders testified against the merger because of its harm to labor markets, including decreasing unions’ ability to negotiate better pay, benefits, and working conditions. Multiple union leaders testified that in order for strikes to provide effective leverage in negotiating good union contracts, employers must fear losing business to competitors and unions need to be able to direct customers to shop at other (preferably unionized) stores for the duration of the strike. Jon McPherson, Vice President of Associate and Labor Relations at Kroger testified that Albertsons is the only employer in the country that Kroger does multi-employer bargaining with and the only employer in the country Kroger does coordinated employer bargaining with. Unions play these two employers against each other when negotiating contracts. So if these two supermarket giants merge, unions lose a powerful tool to ensure strong collective bargaining agreements.
• Kroger and Albertsons do not need to “merge to compete” with Walmart or any other grocer. Such arguments are nothing more than sleight of hand. Pro-merger talking points cite national aggregate figures, ignoring that most grocery shopping is local; Kroger’s own securities filings acknowledge that most people do their weekly shopping at a store within a 2 to 2.5 mile radius from home. Reporting indicates that Kroger or Albertsons banners have higher market shares than Walmart in many regions, including Northern California, Detroit, Arizona, and more. According to Albertsons’ own annual report, it is “No. 1 or No. 2 by market share in 70 percent of the [metro regions] in which it operates.” In any event, a general desire to leapfrog ahead of a particular competitor in market share or engage in nationwide empire building is not a defense to antitrust laws. Allowing this merger would give Walmart an excuse to make more acquisitions on the basis that it has a lower market share in many areas than a combined Kroger/Albertsons. Such contagious consolidation is bad for consumers and workers, and ultimately dangerous to democracy.
• Corporate promises about speculative merger benefits are not legally binding– and are especially untrustworthy coming from Albertsons’ CEO, who admitted destroying evidence. Kroger CEO Rodney McMullen admitted on the stand that promises about the deal’s benefits for the public are not legally enforceable, and specifically admitted that the merged Kroger/Albertsons could change their mind and close stores at any time after the deal goes through. The same holds true for all other promises associated with this deal, including price cuts or benefits for workers. Even CNBC, which has rarely met an M&A deal it didn’t like, did not believe these lofty promises. These claims are especially untrustworthy when coming from Albertsons CEO Vivek Sankaran, who admitted deleting at least 1700 text messages with Board members, the CEO of Kroger, and others, and also admitted that Albertsons did not conduct any studies of “synergies” that might result from the deal.
• Albertsons has a track record of broken promises resulting in store closures and worker layoffs. Kroger and Albertsons are attempting to skirt scrutiny by pledging to keep stores open and divest stores to keep the market competitive. But a previous divestment attempt led to the failure of dozens of stores. When Albertsons acquired Safeway, in order to get the deal through some stores were divested to a third party buyer Comvest Partners– just like Kroger and Albertsons both plan to divest 579 stores to third party buyer C&S in this deal. Andrea Zinder, President of UFCW Local 324 in Southern California, testified that the union trusted assurances that Haggen (a chain owned by Comvest) would be a good operator and told senior workers to give them a chance. But instead, within six months Haggen declared bankruptcy and many stores were closed, so those workers lost their jobs and communities lost shopping options. The remaining stores were sold back to Albertsons for pennies on the dollar.
• Hundreds of stores are at an increased risk of closing if this merger goes through due to a divestiture package that is designed to fail.
  • Divestitures are supposed to create viable competitors that will offset the loss of competition when competitors merge.
  • But instead of leveraging their operational expertise to ensure good outcomes, both the CEO of Kroger Rodney McMullen and the CEO of Albertsons Vivek Sankaran testified that they had no involvement in designing the divestiture package, which affects 579 stores. Meanwhile, C&S Senior VP of corporate development and financial planning Alona Florenz testified that Kroger was giving C&S its “worst chains.”
  • Despite scaremongering by Albertsons CEO Vivek Sankaran that Albertsons would have to resort to store closures if the merger does not go through, he testified that Albertsons financially sound and actually has not identified any specific stores for closure. This follows previous sworn testimony to courts and Congress that Albertsons was in “excellent” financial condition in order to justify a debt-fueled $4 billion special dividend to private equity investors.
  • The real risk of store closures is if the merger does go through, due to a badly designed divestiture package that appears to be stacked with weaker stores that are not receiving the private label brands or IT and analytics services they would need to viable compete with a combined Kroger/Albertsons. This divestiture package may instead be designed to satisfy other motivations behind investments by C&S’s owners and Softbank.

Read Economic Liberties’ coverage of opening arguments, selected witnesses [Day 1, Day 2, Day 3] and CEO testimony to learn more.

Read Economic Liberties’ Myth/Fact on the Kroger-Albertsons Merger here.

Read “Supermarket Squeeze: The Real Costs of the Kroger-Albertsons Deal” to learn more.

Read about other ways to stop domination by corporate giants in food markets and beyond here.

Learn more about Economic Liberties here.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.