The U.S. Federal Trade Commission and eight states said on Monday they are suing to block supermarket chain Kroger’s (KR.N), opens new tab $24.6 billion deal to buy smaller rival Albertsons (ACI.N) , opens new tab, saying it would boost grocery prices for millions of Americans.
The deal, which would create a grocery empire with more than 4,000 stores, has drawn tough scrutiny from lawmakers and consumer groups worried about higher grocery prices, job losses, store closures and diminishing choice for consumers.
U.S. food prices have risen by 25% over the last four years, and while food inflation is showing signs of cooling off in 2024, grocery bills have become a growing concern for shoppers.
The deal would strengthen Kroger’s position as the second largest player in the US grocery market behind Walmart.
The FTC’s lawsuit comes at a time when the Biden administration has pressed for lower grocery prices and pushed back against big-ticket mergers that risk price hikes, affecting consumers in areas ranging from medicines to airline tickets.
The White House, after the FTC suit was announced, said President Joe Biden believes large corporations must be checked by healthy competition.
Shares of Kroger fell 2%. Albertsons stock rose 0.6%. The deal spread, a measure of investor confidence in the merger, implies less than 40% chance of the deal being completed.
While the FTC charged the deal will eliminate “fierce competition between Kroger and Albertsons,” Kroger defended their business model, saying it has reduced prices every year since 2003 and would be applied to the merged company.
The FTC’s legal efforts “only strengthens larger, non-unionized retailers like Walmart WMT.N>, Costco COST.O> and Amazon.com (AMZN.O), opens new tab by allowing them to further increase their overwhelming and growing dominance of the grocery industry,” Kroger said in a statement.
An Albertsons spokesperson added, “We are disappointed that the FTC continues to use the same outdated view of the U.S. grocery industry it used 20 years ago, and we look forward to presenting our arguments in Court.”
But the FTC sees the situation differently, noting the “supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years,” and warning the deal would further exacerbate “the financial strain consumers across the country face today,” said Henry Liu, Director of the FTC’s Bureau of Competition.
California Attorney General Rob Bonta has also raised concerns over access to pharmacies and fresh groceries in rural areas and small towns.