Washington AG Wages War on Kroger/Albertsons Merger

Washington attorney general Bob Ferguson recently introduced an antitrust lawsuit to block a merger agreement between grocery chains Kroger and Albertsons. Preaching a false sermon of consumer price gouging, shrinking product options, and farmer exploitation, Ferguson has been spreading the gospel of a statewide grocery monopoly. If not blocked on the federal level, he warns, this monopolist plague will soon grip every grocery store in the nation. 

The only problem? Ferguson’s flashy appeals to antitrust hysteria could not be further from the truth about the Kroger/Albertsons merger. Instead of moving to block the merger, attorney generals like Ferguson should recognize that the merger will allow smaller grocery chains to expand their franchise base while shoring up national competition. Rather than cornering the grocery market, this deal will strengthen competition and benefit American shoppers. 

This suit, labeled “premature” in a joint statement from Kroger and Albertsons, comes on the heels of a year-long regulatory review by the FTC. After pushing back its December 15th deadline to bring formal charges against the merger, the Lina Khan regime has still failed to make a coherent case against the Kroger/Albertsons deal. In tandem with the FTC’s bureaucratic stalling and unnecessary delay tactics, this new Washington lawsuit has forced the grocery chains to postpone their merger until August 2024. 

The deal itself, worth nearly $24.6 billion, would bring nearly 2,272 Albertsons franchises under the Kroger umbrella, ballooning the conglomerate to a 13% share of the US grocery market. Kroger and Albertsons have argued that consolidation is necessary to stay competitive in an industry that has seen the rise of Walmart, Amazon, Target, and others as grocery magnates. 

Competing with their rivals in both brick-and-mortar stores and in digital marketplaces, Kroger and Albertsons decided to join forces to maintain diversified market competition. Currently, Walmart holds a 25% market share among US grocers, while the top five conglomerates represent over 58% of the US grocery market. Faced with the option of consolidation or elimination, Kroger and Albertsons have chosen to unite rather than cede more market influence to their competitors. 

However, a growing coalition of state attorney generals orchestrated by AG Ferguson have been lobbying the FTC to block the deal. In his suit, Ferguson argues that “free enterprise is built on companies competing…without a competitive marketplace, they will pay higher prices at the grocery store.” While scrambling to find a route to the idealistic high ground, he must have overlooked how this merger honors every aspect of his sad attempt at a cheap shot. 

Ferguson is completely right to claim that robust competition is the foundation of free enterprise. This is why Kroger and Albertsons have committed to a divestiture campaign to sell-off over 400 Albertsons franchises nationwide, including over a hundred in the state of Washington. Not to mention, in his state, these chains represented less than 50% of all grocery stores prior to this pro-competition restructuring. Post-merger, Kroger would still not command a majority within the state grocery market, while actively generating new competition by sacrificing its franchise territory to smaller rivals.

Does that sound like the agenda of a powerful monopoly to you?   

In the national conversation, FTC bureaucrats have expressed similar fears of hyper-consolidation within the US grocery market. If the deal were to be authorized, critics have predicted a war upon American shoppers, reinforced by monopolist hallmarks such as consumer price gouging and artificial product scarcity. For a merger that would represent less than 1/7 of the national grocery market, this fear mongering is melodramatic and not based in reality. 

These alarmist claims explicitly contradict the post-merger objectives of Kroger, which has pledged a $500 million investment to reduce company prices in addition to an incremental $1.3 billion to “enhance the customer experience.” Protections for American workers, the crown jewel of the Biden administration’s activist antitrust agenda, are also safeguarded by this deal. Kroger has “committed to retaining” all existing Albertsons’ employees, union contracts and collective bargaining agreements, while guaranteeing an “incremental $1 billion to raise wages and comprehensive benefits for all associates post-close.”

In sum, this Kroger/Albertsons merger is a far cry from the brutal monopoly that the FTC and activist attorney generals would have you believe. Ironically, this deal is essential for sustained competition within the national grocery market. If Kroger and Albertsons were to independently fail, which is currently a real possibility, their remains would be absorbed by a much larger rival. Either two weak chains will unite to survive, or a grocery titan will quietly stand by to gobble up the spoils of their demise. When investigating this merger, the FTC should reconsider which outcome is really in the best interest of the American public. Far from being an incubated monopoly, this deal will help American shoppers burdened with generation-high inflation.