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Kroger Albertsons merger-logos.jpeg Kroger/Albertsons

Senators grill Kroger, Albertsons CEOs on merger

CEO of Fresh Encounter, others argue for importance of enforcing antitrust laws to protect consumers

The CEOs of Kroger and Albertsons defended their proposed merger as a potential catalyst for building a more competitive company at a Senate subcommittee hearing on Tuesday.

In an hours-long questioning that became contentious at times, senators grilled the executives about the potential of the merger to result in higher prices for consumers and lost jobs for workers, the competition that the new company would face from alternative formats, and the combined buying power that the companies would have compared with smaller retailers, among other issues.

The food retailing market today provides consumers with “endless opportunities and options of where and how to shop,” said Rodney McMullen, chairman and CEO of Kroger. “This merger will allow us to compete even more.”

Although he argued that consumers are able to choose between options such as Walmart, Amazon, Costco and other retailers, Sumit Sharma, senior researcher, technology competition, Consumer Reports, testified that the universe of competitors for antitrust purposes should be limited to retailers that exert direct competitive constraints on Kroger and Albertsons—namely, other similar supermarkets.

“I think we have empirical evidence that retail mergers will lead to increased prices,” he said. “Kroger and Albertsons claim this merger will help the consumer. We disagree.”

Even if the merger results in the types of efficiencies that the companies seek, Sharma said, “Why would any of those savings be passed along to consumers, if competition is not there to incentivize them to do so? These are, after all, profit-maximizing corporations.”

McMullen pointed to the company’s past acquisitions, including the purchase of Harris-Teeter and Roundy’s, as examples of the company’s ability to successfully integrate acquisitions without harm to the consumer.

Senators, however, pointed to the 2015 merger of Safeway and Albertsons, in which the companies divested 168 stores, only to see dozens of them close when Haggen, which acquired many of the locations, filed for bankruptcy only nine months later, and Albertsons ended up re-acquiring some of the stores.

Vivek Sankaran, president and CEO of Albertsons Cos., said that when viewed with a wider lens, the overall merger was a success because it led to the creation of an improved and more competitive operation.

“This transaction is good for Albertsons’ loyal customers, associates and communities,” he said of the proposed Kroger-Albertsons deal.

Speaking on behalf of independent retailers who are members of the National Grocers Association, Mike Needler Jr., CEO of Findlay, Ohio-based regional grocery operator Fresh Encounter, said regulators should consider the antitrust implications of the merger both on a market-by-market basis, and on a national scale because of their combined buying power.

Although Needler said he is “agnostic” about the merger itself, he said smaller regional retailers such as Fresh Encounter lack the access to pricing and terms from suppliers that larger retailers can obtain. He described the relationship between retailers and suppliers as like being on a waterbed, in which pressure on suppliers to lower prices for some retailers forces them to increase prices for others.

Kroger and Albertsons, Needler said, are trying to compete with Walmart by “just jumping on each other’s backs to move the water a little bit more in their favor.”

While he said his own company’s history of acquisitions have resulted in better experiences for consumers in those markets, he said the potential exists for a combined Kroger-Albertsons to gain an unfair advantage when it comes to buying from suppliers.

“Countless grocers have been put out of business with predatory pricing,” he said.

The Robinson-Patman Act, the antitrust law that seeks to prevent sellers from charging different prices to different buyers, should be better enforced, he said.

That applies at the national level, but the potential ramifications need to be evaluated in each community where the two retailers operate, Needler said.

“The FTC must use a microscope, on a market-by-market basis, down to the street corner, to ensure the combination doesn’t harm consumers,” he said.

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