Many Americans are focusing on their grocery spending as they consider their vote in the upcoming election. A significant factor is the proposed $25 billion merger between Kroger and Albertsons, two of the largest grocery chains in the country.
If the merger goes through, the combined entity would become the second-largest grocery chain, second only to Walmart. The merger announcement in October 2022 drew immediate concern from Congress, the Federal Trade Commission (FTC), consumer rights groups, and labor activists, leading to testimonies, FTC intervention, and a bipartisan lawsuit to block the merger.
The merger raises fears about reduced competition and poorer quality for consumers. Shoppers in areas with little competition, like Victoria Anderson in rural Vermont, already experience high prices with no alternative options.
Anderson notes that grocery prices have not stabilized despite economic indicators suggesting they should. Over the past two years, inflation has cooled by 5.8%, and the costs of goods like eggs and milk have dropped, yet these benefits aren’t reflected in grocery prices, contributing to consumer frustration.
The Biden administration has highlighted the slowing of inflation as an economic success, but many consumers, including Anderson, are not seeing the benefits, which strengthens conservative critiques.
Kroger-Albertsons Merger Sparks Concern Over Grocery Prices and Market Competition Ahead of Election
Rakeen Mabud, chief economist at the Groundwork Collaborative, points out that large companies exploit situations like inflation or pandemics to increase profits, especially in sectors with captive markets like groceries. In 2023, corporate profits reached their widest margins since the 1950s, yet consumer prices continued to rise.
In response, Democratic senators introduced the Price Gouging Prevention Act, which aims to outlaw price gouging and empower the FTC to target companies that profited excessively from the COVID-19 pandemic. The bill’s enforcement will depend on the administration in power.
Trump has previously weaponized the FTC to block mergers he personally opposed, but also promised leniency to industries he favors, like oil and gas. The outcome of the Kroger-Albertsons merger could hinge on political influences, given the connections between key players and political figures.
Under Biden, the FTC has taken a firm stance against mergers, blocking significant deals in the airline industry and hospital systems, and updating antitrust guidelines to scrutinize highly consolidated sectors like grocery stores.
William Kovacic, a former FTC commissioner, notes that Biden’s guidelines point towards tougher merger control, emphasizing the merger’s potential negative impact on competition and labor markets.
The merger could have wide-reaching effects on prices and employment in urban centers where Kroger and Albertsons dominate the market. While Kroger promises benefits like higher wages and job security, historical evidence and recent labor disputes suggest otherwise.
In 2022, Colorado’s attorney general accused the companies of colluding to suppress worker wages during a strike. Recent authorizations for strikes at Kroger-owned stores and reports of worker homelessness underscore the challenges employees face.
To address monopoly concerns, Kroger and Albertsons plan to divest 579 stores to C&S Wholesale, though experts question whether this will be enough to maintain competition. Past mergers, like Albertsons’ acquisition of Safeway, have shown that divested stores often struggle to compete, sometimes leading to bankruptcy and further consolidation.
The failure of Haggen, which bought stores from Albertsons, illustrates the difficulties small competitors face against giant chains.
The ongoing regulatory scrutiny and political battles could prolong the uncertainty around the merger. For consumers like Anderson, the immediate concern remains the cost of groceries, a key factor influencing their vote. Voters’ concerns about cost-of-living issues, particularly grocery prices, could significantly impact their support for candidates who promise to address these economic challenges.
