Published on: November 30, 2022
Kroger CEO Rodney McMullen and Albertsons CEO Vivek Sankaran went before the US Senate's Subcommittee on Competition Policy, Antitrust and Consumer Rights yesterday, arguing that the merger of their two companies - a deal valued at more than $24.6 billion - will be good for consumers and employees, and will not be anti-competitive.
“I just don’t see less competition going forward,” McMullen said. “It’s easy for customers to make a right turn or a left turn.”
The argument is that a merger of the nation's second and fourth ranked supermarket chains will allow them to be more competitive with number one Walmart, and with Amazon, which has an outsized influence on the marketplace; even combined, the new combined company will still be smaller than Walmart.
“The marketplace for groceries over the past decade has completely transformed making the competition for consumers fierce,” said Sankaran. “The best way to compete with mega stores like Walmart and highly capitalized online companies like Amazon will be through a merger with Kroger."
CNBC writes that "Sen. Amy Klobuchar, a Democrat from Minnesota, led the hearing Tuesday along with Sen. Mike Lee, a Republican from Utah. Both challenged the companies on their actions, including Kroger’s $1 billion in share buybacks announced last year and plans to pay dividends to shareholders as well as previous deals, such as Albertsons’ acquisition of Safeway.
"They emphasized that the proposed deal comes at a time when groceries are taking up more of American families’ budgets. Food prices have surged as inflation hovers near four-decade highs. Prices of everyday items, including butter, eggs, poultry and milk have jumped by double-digits from the year-ago period as of October, according to the most recent federal data available."
From the Wall Street Journal coverage:
"The proposed merger has drawn opposition from elected officials, independent retailers and some union groups over its potential impact on workers’ jobs, as well as on industry competition and food prices for consumers … Kroger and Albertsons have said their combination would give them a more national reach with a bigger network of stores, distributors and suppliers. The companies have said they expect to invest $500 million in keeping prices low, along with spending $1 billion on wages and benefits and $1.3 billion on improving Albertsons stores."
The Associated Press noted that Lee conceded that "the subcommittee would have little say in whether the merger will go through. That will be a decision for the Federal Trade Commission and the Justice Department. But he said the hearing was an important opportunity for the public to understand a merger that could impact their lives."
Also testifying were Sumit Sharma, senior researcher at Consumer Reports, and Andrew Sweeting, professor of economics at the University of Maryland.
Sharma argued against the merger: "We are skeptical that the benefits of the deal as claimed by the parties will be realized. The most likely outcome of this merger would be to significantly lessen competition and lead to higher prices, fewer choices and worse supermarket access in some neighborhoods … Even if there are some efficiencies, these cost savings are not likely to be passed on to consumers. Why would these be passed on to consumers unless competition required it?”
And Sweeting argued that competitive issues need to be evaluated local market by local market, not seen in a national context.