U.S. sues to block major grocery merger that would affect Shaw’s supermarkets

Shoppers head into Shaw’s in South Portland. Derek Davis/Staff Photographer

The future of Shaw’s supermarkets grew more uncertain Monday as the Federal Trade Commission sued to block a planned merger of grocery giants Kroger and Albertsons, saying the $24.6 billion deal would eliminate competition and lead to higher prices for millions of Americans.

Kroger fired back that blocking its takeover of Albertsons, which owns 19 Shaw’s supermarkets in Maine, actually would harm the very people the FTC purports to serve: American consumers and workers.

The FTC filed the lawsuit in U.S. District Court in Oregon, joined by the attorneys general of eight states and the District of Columbia, The Associated Press reported.

“Kroger’s acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today,” Henry Liu, director of the FTC’s Bureau of Competition, said in a statement.

The FTC said the proposed deal, which would be the largest grocery merger in U.S. history, also would erase competition for workers, threatening their access to higher wages, better benefits and improved working conditions.

The federal action Monday follows lawsuits filed earlier this year in Colorado and Washington state that aimed to block the merger. States that joined the federal effort are Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming.

Kroger executives say the merger would have a very different outcome, and that the federal lawsuit makes it more likely that American consumers will see higher food prices and fewer grocery stores at a time when communities across the country are already facing high inflation and food deserts.

“This (lawsuit) only strengthens larger, non-unionized retailers like Walmart, Costco and Amazon by allowing them to further increase their overwhelming and growing dominance of the grocery industry,” Kroger said in a statement Monday.

“The combined company (has) committed that no stores, distribution centers or manufacturing facilities will close as a result of the merger, including those divested to C&S Wholesale Grocers,” Kroger said. “The merging parties look forward to litigating this action in court so we can deliver the benefits of this merger to communities across America – lower prices, more choices and more good-paying union jobs for decades to come.”

More specifically, the merger would bring long-term job security, higher wages and expanded benefits for associates, Kroger said.

The combined company also has committed to kick start the merger by investing $500 million to begin lowering prices, and an additional $1.3 billion to improve Albertsons company stores.

“Kroger’s business model is to take costs out of the business and invest in lowering prices for customers,” the company said Monday. “Kroger has reduced prices every year since 2003, resulting in $5 billion invested to lower prices and a 5% reduction in gross margin over this period.”

Kroger and Albertsons, the nation’s largest supermarket operators, agreed to merge in October 2022. The companies said a merger would help them better compete with Walmart, Amazon, Costco and other major rivals. Together, Kroger and Albertsons would control about 13% of the U.S. grocery market; Walmart controls 22%, according to J.P. Morgan analyst Ken Goldman.

In an effort to satisfy federal regulators, Kroger and Albertsons announced in September that they would sell 413 stores, eight distribution centers, two offices and other assets for about $1.9 billion to C&S Wholesale Grocers, which supplies more than 7,500 food sellers, including over 500 independent Piggly Wiggly grocery stores.

Kroger and Albertsons had hoped to close the deal early this year. But the two companies announced in January that it was more likely to close in the first half of Kroger’s fiscal year, which started in February.

Cincinnati-based Kroger is the nation’s largest supermarket operator, with about 500,000 associates among 2,750 stores in 35 states, including the Ralphs, Dillons and Harris Teeter chains. Albertsons, headquartered in Boise, Idaho, is the second largest, with about 290,000 associates among 2,272 stores in 34 states, including the Star Market, Safeway and Vons chains, and 127 Shaw’s across New England.

The merger comes as Maine’s supermarket landscape continues to diversify, with the opening last year of the state’s first Costco in Scarborough, and further growth and consolidation among Shaw’s, Hannaford, Market Basket, Target, Walmart and independent grocers across the state.

While none of more than 5,500 supermarkets related to the merger is targeted for closure, company executives aren’t saying exactly how Shaw’s stores would be affected.

Founded in Portland in 1860, Shaw’s hasn’t responded to repeated requests for comment on the merger and lawsuits. The Shaw’s store in South Portland’s Mill Creek shopping area has begun a major renovation.

Neither Albertsons nor Kroger have answered specific questions about the potential impact on Shaw’s, other than to say they don’t expect the chain’s stores in Maine to change as a result of the merger.

But the merger, announced at a time of high food-price inflation, was bound to be closely scrutinized by regulators. U.S. prices for food eaten at home typically rise 2.5% per year, but in 2022 they rose 11.4% and in 2023 they rose another 5%, according to government data. Inflation is cooling, but gradually.

Still, the United Food and Commercial Workers union, which represents 835,000 grocery workers in the U.S. and Canada, voted last year to oppose the merger, saying Kroger and Albertsons had failed to be transparent about the potential impact of the merger on workers.

The union also criticized a $4 billion payout to Albertsons shareholders that was announced as part of the merger deal. Several states, including Washington and California, tried unsuccessfully to block the payment in court, saying it would weaken Albertsons financially.