Jewel and Mariano's parent companies head to court to defend merger plan
CHICAGO (CBS) -- Kroger and Albertsons – the parent companies of the Mariano's and Jewel grocery store chains, respectively – head to court on Monday to face off with federal regulators over the fate of what would be the largest grocery store merger in American history.
The Federal Trade Commission has asked for a preliminary injunction to block the merger, arguing it would eliminate competition between the supermarket chains and would lead to even higher prices for shoppers.
The two companies insist they need to combine forces to compete against rivals like Costco.
The proposed merger, announced in October 2022, is valued at $24.6 billion. If it goes through, the combined companies would control approximately 13% of the U.S. grocery market.
Under the deal, Kroger and Albertsons would sell 579 stores to C&S Wholesale Grocers, the parent company of Piggly Wiggly and Gran Union supermarkets. The sale to C&S would include 35 Jewel-Osco and Mariano's stores in Illinois, and the companies have said none of the stores will close. C&S said it would honor all collective bargaining agreements with workers.
Kroger and Albertsons would then run more than 250 stores in Illinois.
Together, the companies employ around 710,000 people, and operate nearly 5,000 stores, along with roughly 4,000 pharmacies. Cincinnati-based Kroger operates around 2,800 stores in 35 states, including the Mariano's, Harris Teter, Ralph's, and Smith's brand. Boise-based Albertsons runs about 2,200 stores in 34 states, including the Jewel-Osco and Safeway brands.
The FTC claims if the merger goes through, workers' wages and benefits would go down if the companies were no longer competing.
The United Food and Commercial Workers union, which represents 835,000 grocery workers in the U.S. and Canada, also voted last year to oppose the merger, saying Kroger and Albertsons had failed to be transparent about the potential impact it would have on workers.
A hearing on the FTC's request to block the merger is expected to last three weeks before a federal judge in Oregon, with about 40 witnesses expected to take the stand, including the CEOs of both Kroger and Albertsons.
Kroger has promised to invest $1 billion to lower prices as soon as the deal closes. It said it also invested in price reductions when it merged with Harris Teeter in 2014 and Roundy's in 2016. Kroger also promised to invest $1.3 billion in store improvements at Albertsons as part of the deal.
"Kroger joining with Albertsons will mean $1 billion in lower prices to help customers fight inflation and more choices for more customers in more communities, long-term job security, higher wages and more industry-leading benefits for associates, and a strong unionized workforce. The C&S divestiture plan builds on our merger commitments by ensuring zero stores will close as a result of the merger, all frontline associates will remain employed, all existing collective bargaining agreements will continue, and associates will continue to receive industry-leading benefits alongside bargained-for wages. The divestiture plan will extend a well-capitalized competitor into new geographies, and C&S's strong operational focus and financial resources will position the divested stores to successfully operate and serve their communities for years to come. If the merger is blocked, the non-union retailers like Walmart and Amazon will become even more powerful and unaccountable." - Kroger spokesperson