Kroger, Albertsons leaders believe merger will reduce prices for consumers, experts aren't so sure
WASHINGTON - A Congressional committee grilled the leaders of Kroger and Albertsons grocery chains over their proposed merger.
The Senate Judiciary Committee's Antitrust panel questioned the leaders about the $25 billion deal for Kroger to purchase Albertsons stores.
"Won't Kroger feel less competitive pressure to keep prices low?" asked Sen. Amy Klobuchar (D-Minnesota).
Kroger seeks to create grocery giant with $20B Albertsons bid
Kroger CEO Rodney McMullen says the deal, which was announced on Oct. 14, will allow shoppers to save money.
"Our commitments are to lower prices starting Day 1, continue investing in our associates and stores and doing more in our communities than either of us can do alone," said McMullen.
Albertsons CEO Vivek Sankaran says the merger will allow them to keep up with major competitors.
"The best way to compete with mega stores like Walmart and highly capitalized online companies like Amazon will be through a merger with Kroger," said Sankaran.
Experts are skeptical.
"Kroger and Albertsons claim that this merger will benefit consumers — we are not convinced," said Sumit Sharma from Consumer Reports.
Sharma believes if Kroger soaks up one of its main competitors in Albertsons. It might give the grocery chain too much control over customers.
"Kroger lists Albertsons as one of its main competitors in 5 out of 10 of Kroger’s top markets covering a total of 546 Kroger stores," he said.
A representative of the National Grocer's Association says the merger could put mom-and-pop grocery stores out of business.
"I am concerned that if guardrails are not in place, long-term competition and that consumers could be harmed." said Michael Needler, the President of Fresh Encounter Inc. "With the merger of Kroger and Albertsons, what we fear is the creation of another power buyer like Wal-Mart where the combined firm gains significant more leverage with suppliers."
"Countless grocers have been put out of business in areas where we now consider food deserts through successful predatory pricing campaigns," he said.
Kroger projects the merger will pass along $500 million of savings to customers, but the chain could not put a timetable on that figure.
Albertsons operates Tom Thumb, a popular chain in North Texas.
It's unclear how those stores and other connected chains will be affected.
The merger, and questions around it, come during a period of record-setting inflation.
Some senators point out that, even during these trying times, Kroger has passed along costs to customers.
"And your operating profit increased from $2.8 billion in 2020 to $3.5 billion in 2021. That’s a 25 percent jump," said Klobuchar.
"Sadly consumers have to choose between buying groceries and putting gas in their cars," said Sen. Mike Lee (R-Utah).
The deal is expected to close in 2024.
Congress does not have to approve the deal.