The $25-billion proposed merger between Kroger and Albertsons, two of the largest supermarket chains in the US, has faced significant challenges. In February, the Federal Trade Commission (FTC) and eight states filed a lawsuit to block the deal, arguing that it would eliminate competition, leading to higher grocery prices and job losses.
In response, Kroger and Albertsons have proposed divesting a significant number of stores to C&S Wholesale Grocers. Initially, they proposed selling 413 stores and eight distribution centers, with the possibility of shedding 237 more stores to gain regulatory approval. However, the FTC deemed that plan inadequate.
The revised divestiture plan announced on Monday includes an additional 166 store locations, bringing the total number of divested stores to 579. Kroger will receive $2.9 billion in cash for these stores, up from the previous $1.9 billion payout.
While Kroger maintains that the merger will benefit customers and employees, concerns have been raised by industry members and union leaders. The coalition representing Kroger and Albertsons workers expressed doubts about C&S’s ability to operate the acquired stores effectively given its lack of experience in retail operations.
The FTC’s lawsuit against the merger is scheduled for a hearing in August. Historically, the FTC has been hesitant to accept divestiture packages as an antitrust remedy. However, Maureen Ohlhausen, the former chairperson of the FTC, believes the commission must carefully consider the changing landscape of the grocery market, which now includes digital retail and significant competitors like Walmart and Amazon.
The FTC faces the challenge of defining competition in the evolving grocery industry and determining whether the proposed divestitures sufficiently address antitrust concerns.
