US lawmakers skeptical grocery merger will mean lower prices

Nov 29, 2022, 4:49 PM | Updated: 5:31 pm
Kroger CEO William Rodney McMullen speaks during a Senate Judiciary Subcommittee on Competition Pol...

Kroger CEO William Rodney McMullen speaks during a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on the proposed Kroger-Albertsons grocery store merger, at the Capitol in Washington, Tuesday, Nov. 29, 2022. (AP Photo/Mariam Zuhaib)

(AP Photo/Mariam Zuhaib)

U.S. senators from both parties expressed skepticism Tuesday that a proposed merger between grocery giants Kroger and Albertsons would result in lower prices for consumers.

“Fewer local options mean less competition to keep prices low,” said Sen. Alex Padilla, a California Democrat, in a hearing before the antitrust subcommittee of the Senate Judiciary Committee. Padilla said Kroger and Albertsons compete in many California cities.

But the CEOs of Kroger and Albertsons insisted there will still be competition, and said a merger will help them counter growing rivals like Walmart, Costco and Amazon.

Kroger CEO Rodney McMullen said the days of shoppers buying all their groceries at one store once a week are gone. Shoppers often get their groceries at five or six different locations, he said.

“I just don’t see less competition going forward,” McMullen said. “It’s easy for customers to take a left turn or a right turn.”

Kroger announced its plan to acquire Albertsons for $20 billion in mid-October. Together, the companies would control about 13% of the U.S. grocery market. If it’s approved by U.S. antitrust regulators, the deal is expected to close in early 2024.

Sen. Mike Lee, a Utah Republican, noted the subcommittee would have little say in whether the merger will go through. That will be a decision for the Federal Trade Commission and the Justice Department. But he said the hearing was an important opportunity for the public to understand a merger that could impact their lives.

Lee needled Kroger for approving a $1 billion stock buyback last year even as food prices were jumping for consumers. Lee said U.S. households paid an average of $110 more for food in October than they did a year ago.

“If Kroger wasn’t passing on savings to consumers when it was competing with Albertsons, then why would we think it would pass on savings after it eliminates competition?” he said.

But McMullen said Kroger has lowered prices after other mergers, like its 2013 acquisition of Harris Teeter.

“From a business standpoint, that is our commitment,” he said.

McMullen reiterated Kroger’s plan to spend $500 million reducing prices, $1.3 billion updating Albertsons stores and $1 billion on higher employee wages and improved benefits if the merger goes through.

Sen. Amy Klobuchar, a Minnesota Democrat, asked about the timeframe for that spending and wondered who would make sure the company met its commitments. McMullen said those investments would be spread over four years.

Others peppered the companies with questions about potential store closures or employee layoffs. Kroger and Albertsons have said they will sell or spin off up to 375 Albertsons stores in markets where they currently compete.

“The intent is not to close stores. The intent is to divest stores,” Albertsons President and CEO Vivek Sankaran said.

But that didn’t ease lawmakers’ concerns. Several noted that when Albertsons acquired Safeway in 2015 for $9.2 billion, the FTC required it to divest 168 stores. The largest buyer of those stores filed for bankruptcy protection nine months later and Albertsons wound up buying back some of the locations.

“When divested assets head into bankruptcy in less than a year, that remedy is an embarrassing failure,” Lee said.

Sankaran said the FTC approved the buyer in that merger. This time, he said, Albertsons __ pending the FTC’s approval __ may spin off stores into a separate company that would be led by experienced leaders.

Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like Ralphs, Smith’s and Harris Teeter. Alberstons, based in Boise, Idaho, operates 2,273 stores in 34 states, including brands like Safeway, Jewel Osco and Shaw’s. Together the companies employ around 710,000 people.

Federal lawmakers aren’t the only ones scrutinizing the merger plan. Earlier this month, a bipartisan group of state attorneys general sued to block Albertsons from paying a $4 billion dividend to its shareholders until they have reviewed the merger.

That payout is temporarily on hold after a state judge in Washington said he needed more time to consider the matter.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


              Sen. Mike Lee, R-Utah., questions witnesses during a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on the proposed Kroger-Albertsons grocery store merger, at the Capitol in Washington, Tuesday, Nov. 29, 2022. (AP Photo/Mariam Zuhaib)
            
              Kroger CEO William Rodney McMullen speaks during a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on the proposed Kroger-Albertsons grocery store merger, at the Capitol in Washington, Tuesday, Nov. 29, 2022. (AP Photo/Mariam Zuhaib)
            Kroger CEO William Rodney McMullen speaks during a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on the proposed Kroger-Albertsons grocery store merger, at the Capitol in Washington, Tuesday, Nov. 29, 2022. (AP Photo/Mariam Zuhaib) Kroger CEO William Rodney McMullen speaks during a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on the proposed Kroger-Albertsons grocery store merger, at the Capitol in Washington, Tuesday, Nov. 29, 2022. (AP Photo/Mariam Zuhaib) Vivek Sankaran CEO at Albertsons Companies, speaks during a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on the proposed Kroger-Albertsons grocery store merger, at the Capitol in Washington, Tuesday, Nov. 29, 2022. (AP Photo/Mariam Zuhaib) Vivek Sankaran CEO at Albertsons Companies, speaks during a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on the proposed Kroger-Albertsons grocery store merger, at the Capitol in Washington, Tuesday, Nov. 29, 2022. (AP Photo/Mariam Zuhaib) Kroger CEO William Rodney McMullen speaks during a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on the proposed Kroger-Albertsons grocery store merger, at the Capitol in Washington, Tuesday, Nov. 29, 2022. (AP Photo/Mariam Zuhaib) Kroger CEO William Rodney McMullen speaks during a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on the proposed Kroger-Albertsons grocery store merger, at the Capitol in Washington, Tuesday, Nov. 29, 2022. (AP Photo/Mariam Zuhaib) Michael Needler, CEO of grocery retailer Fresh Encounter Inc., speaks during a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on the proposed Kroger-Albertsons grocery store merger, at the Capitol in Washington, Tuesday, Nov. 29, 2022. (AP Photo/Mariam Zuhaib) Vivek Sankaran CEO at Albertsons Companies, speaks during a Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing on the proposed Kroger-Albertsons grocery store merger, at the Capitol in Washington, Tuesday, Nov. 29, 2022. (AP Photo/Mariam Zuhaib)

AP

FILE - Elon Musk departs the Phillip Burton Federal Building and United States Court House in San F...
Associated Press

Tesla gets Justice Department subpoena for self-driving cars

The U.S. Justice Department has requested documents from Tesla Inc. related to its Autopilot and “Full Self-Driving” features, according to a regulatory filing. “To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred,” Tesla said in the filing Tuesday with the Securities and Exchange Commission. The Austin, Texas-based electric […]
7 hours ago
FILE - Hiring signs are displayed at a grocery store in Arlington Heights, Ill., Friday, Jan. 13, 2...
Associated Press

US workers’ pay slowed in the final quarter of 2022

WASHINGTON (AP) — Pay and benefits for America’s workers grew at a healthy but more gradual pace in the final three months of 2022, a third straight slowdown, which could help reassure the Federal Reserve that wage gains won’t fuel higher inflation. Wages and benefits, such as health insurance, grew 1% in the October-December quarter […]
7 hours ago
FILE - A sign marks an entrance to the Robert F. Kennedy Department of Justice Building in Washingt...
Associated Press

Child welfare algorithm faces Justice Department scrutiny

PITTSBURGH (AP) — The Justice Department has been scrutinizing a controversial artificial intelligence tool used by a Pittsburgh-area child protective services agency following concerns that it could result in discrimination against families with disabilities, The Associated Press has learned. The interest from federal civil rights attorneys comes after an AP investigation revealed potential bias and […]
7 hours ago
FILE - The mother of Khant Ngar Hein, killed during anti-government protests, mourns during his fun...
Associated Press

How Myanmar is faring 2 years after army ousted Suu Kyi

BANGKOK (AP) — Two years after Myanmar’s generals ousted Aung San Suu Kyi’s elected government, thousands of people have died in civil conflict and many more have been forced from their homes in a dire humanitarian crisis. Myanmar’s economy, once one of the fastest growing in Southeast Asia, now lags behind where it stood before […]
7 hours ago
FILE - A worker with the Pebble Mine project digs in the Bristol Bay region of Alaska near the vill...
Associated Press

Feds use rare veto to block Alaska copper, gold mine plan

JUNEAU, Alaska (AP) — The U.S. Environmental Protection Agency on Tuesday effectively vetoed a proposed open-pit copper and gold mine in a remote region of southwest Alaska that is a trove of minerals coveted by mining interests but that also supports the world’s largest sockeye salmon fishery. The move by the agency, heralded by Alaska […]
7 hours ago
Associated Press

American Express launches products for small businesses

NEW YORK (AP) — American Express is launching a suite of financial service products for small businesses as it aims build up its presence in the small business sector. The services, called Business Blueprint, stem from the credit card giant’s acquisition of fintech Kabbage in 2020. American Express had been offering small business lines of […]
7 hours ago

Sponsored Articles

...
Day & Night Air Conditioning, Heating and Plumbing

Company looking for oldest air conditioner and wants to reward homeowner with new one

Does your air conditioner make weird noises or a burning smell when it starts? If so, you may be due for an AC unit replacement.
...
Quantum Fiber

How high-speed fiber internet edges out cable for everyday use

In a world where technology drives so much of our daily lives, a lack of high-speed internet can be a major issue.
(Photo via MLB's Arizona Fall League / Twitter)...
Arizona Fall League

Top prospects to watch at this year’s Arizona Fall League

One of the most exciting elements of the MLB offseason is the Arizona Fall League, which began its 30th season Monday.
US lawmakers skeptical grocery merger will mean lower prices