Opponents say merger of grocery giants would create monopoly
East County News Service
November 2, 2022 (Sacramento) -- California Attorney General Rob Bonta today joined attorneys general from the District of Columbia and Illinois in asking the D.C. District Court to temporarily block Albertsons' planned $4 billion payment of a special dividend to shareholders on November 7. The action is due to concerns that the payment would dramatically hamper Albertsons' ability to compete, at a time when a proposed merger between Albertsons and Kroger grocery corporations is under scrutiny by federal regulators.
The complaint follows a letter sent to Albertsons and Kroger last week arguing that the planned payout is premature and would substantially deplete Albertsons' cash flow as inflation drives up prices and an economic downturn appears imminent. The attorneys general seek to delay the payout while review of the proposed merger is ongoing.
Kroger is the second-largest grocer by market share in the United States, behind Walmart, and Albertsons is fourth, after Costco. Kroger also owns numerous other grocery store chains including Ralph’s, Fred Meyer and Food 4 Less. Albertson’s owns Safeway, Vons, Pavilions, and more.
“Albertsons and Kroger operate nearly 5,000 stores between them, including hundreds in California, notes Attorney General Bonta. “As inflation drives up grocery prices, a decrease in competition has the potential to be devastating for hardworking California families and for those who work at these stores,” he says. “This proposed merger is far from a done deal, making Albertsons' decision to give away one-third of its market cap very concerning. I urge the court to delay this payout to allow for a thorough consideration of its impacts on Albertsons' ability to compete while the proposed merger is under review.”
Albertsons and Kroger supply daily necessities to millions of people throughout the United States and employ more than 700,000 workers in communities across the country. The state attorneys general aim to ensure that the proposed merger of these grocery behemoths complies with federal and state antitrust law and does not result in higher prices for consumers, suppressed wages for workers, or other anticompetitive effects.
The federal Sherman Act forbids parties from entering agreements that substantially lessen competition or unreasonably restrain trade. Albertson’s planned divided payment would substantially impact Albertson’s cash flow, making it difficult to continue to compete with Kroger and other grocery chains. Although Albertson’s could try to borrow money to cover its operating expenses, the complaint contends this could be difficult in the face of an economic downtown since Albertson’s lacks an investment grade rating and thus would likely have to pay a high interest rate if it could secure a loan at all.