Arizona joins federal lawsuit to block merger of grocery giants Kroger and Albertsons

PHOENIX – Arizona is part of a federal lawsuit filed Monday to block the controversial merger of Kroger and Albertsons, two of the nation’s largest grocers.

Arizona’s Kris Mayes is one of eight state attorneys general who joined the Federal Trade Commission on the suit filed in the U.S. District Court in Oregon.

Kroger is the parent company for Arizona’s Fry’s supermarkets, while Albertsons operates stores in the state under the Albertsons and Safeway brands.

The companies agreed to a $24.6 billion merger deal in October 2022, saying it would help them better compete with Walmart, Amazon, Costco and other big rivals.

Why does Arizona AG Kris Mayes oppose Kroger-Albertsons merger?

Mayes said residents from across the state have told her they oppose the merger for a variety of reasons.

“Many Arizonans I heard from voiced concerns about potential job losses from combining the two companies,” she said in a press release. “Seniors on fixed incomes told me they were worried that grocery prices would only go up if the merger went through. Military families I spoke to feared their insurance would not be accepted at the pharmacy of a newly merged company.

“Rural Arizonans, in particular, raised serious concerns about how a merger would exacerbate existing food deserts.”

California, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming joined Arizona in the FTC lawsuit. All of the attorneys general for the states involved are Democrats except for Wyoming Republican Bridget Hill.

The action follows lawsuits filed earlier this year in Colorado and Washington to block the merger.

Why is FTC involved in lawsuit to block grocery merger?

Together, Kroger and Albertsons would control around 13% of the U.S. grocery market; Walmart controls 22%, according to J.P. Morgan analyst Ken Goldman.

The merger, announced at a time of high food-price inflation, was bound to get tough regulatory scrutiny. U.S. prices for food eaten at home typically rise 2.5% per year, but in 2022 they rose 11.4% and in 2023 they rose another 5%, according to government data. Inflation is cooling, but gradually.

“Kroger’s acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today,” Henry Liu, the director of the FTC’s Bureau of Competition, said in a statement.

The FTC, which said the proposed deal would be the largest grocery merger in U.S. history, said it would also erase competition for workers, threatening their ability to win higher wages, better benefits and improved working conditions.

The Biden administration has also shown a willingness to challenge big mergers in court. Last month, the Justice Department sued to block a proposed merger between JetBlue Airways and Spirit Airlines.

When do Kroger and Albertsons hope to complete deal?

Kroger and Albertsons had hoped to close the deal early this year. But the two companies announced in January that it was more likely to close in the first half of Kroger’s fiscal year. Kroger’s fiscal second quarter ends Aug. 17.

“Bottom line: this merger will benefit the shareholders of these companies, not regular Arizonans,” Mayes said. “I am proud to stand with the FTC and my fellow attorneys general in suing to block this anticompetitive, anti-consumer and anti-worker merger.”

Kroger issued the following statement in response to Monday’s legal action:

Contrary to the FTC’s statements, blocking Kroger’s merger with Albertsons Companies will actually harm the very people the FTC purports to serve: America’s consumers and workers.

Kroger’s business model is to take costs out of the business and invest in lowering prices for customers. Kroger has reduced prices every year since 2003, resulting in $5 billion invested to lower prices and a 5% reduction in gross margin over this period. This business model is immediately applied to merger companies. Kroger has a proven track record of lowering prices so more customers benefit from fresh, affordable food, and our proposed merger with Albertsons will mean even lower prices and more choices for America’s consumers.

The FTC’s decision makes it more likely that America’s consumers will see higher food prices and fewer grocery stores at a time when communities across the country are already facing high inflation and food deserts. In fact, this decision only strengthens larger, non-unionized retailers like Walmart, Costco and Amazon by allowing them to further increase their overwhelming and growing dominance of the grocery industry.

The Associated Press contributed to this report.

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