Kroger-Albertsons merger blocked by judge who sided with Federal Trade Commission's anti-trust argument

The merger would have 'nearly doubled Kroger's
store count.' (Kroger and Albertsons graphics)

The planned $20 billion merger between Kroger and Albertsons was blocked by a federal judge who "agreed with the Federal Trade Commission’s argument that Kroger would become the dominant player in traditional supermarkets if allowed to add nearly 2,000 stores by taking over Albertsons," report Dave Michaels and Patrick Thomas of The Wall Street Journal. U.S. District Judge Adrienne Nelson "rejected the companies’ counterargument that selling 579 stores to C&S Wholesale Grocers would replace the lost competition."

The ruling is a victory for FTC Chair Lina Khan, "who has waged legal battles to stop megadeals rather than accept companies’ proposed fixes to address competition concerns," Michaels and Thomas write. Kroger and Albertsons executives marketed the deal as a necessary move to compete with Walmart and Amazon.

Nelson's ruling cited the fierce "head-to-head competition" between Kroger and Albertsons, which the proposed merger "would have removed." Michaels and Thomas write, "An FTC spokesman said the ruling 'protects competition in the grocery market, which will prevent prices from rising even more.'"

If the deal had succeeded, Kroger's store count would have almost doubled, "exceeding the scale of Walmart’s 3,500 supercenters," Michaels and Thomas add. "Rodney McMullen, Kroger’s longtime chief executive, had pledged to eventually invest $1 billion annually in lowering prices at the acquired Albertsons stores. . . . FTC attorneys argued the deal would only give Kroger a reason to increase prices by removing a competitor." 

Earlier in the year, Albertsons CEO Vivek Sankaran told a federal court that "if Albertsons’s sale to Kroger was blocked, the supermarket chain would consider closing stores or laying off workers," the Journal reports. "He said that while the company’s business is sound for now, in the next two to three years it could need to find another buyer."

Some farm groups object to proposed merger of Kroger and Albertsons, saying a bigger grocer will hurt small farmers

The planned merger of grocers Kroger and Albertsons "has farmers and farmworkers worried about its negative impact on farms and rural communities," reports Shelby Vittek of Ambrook Research. The National Family Farm Coalition, the National Farmers Union, Farm Action and an assortment of regional grower associations "sent a letter to the Federal Trade Commission expressing their opposition to the merger, which they said would 'create a new mega-grocery buyer with exceptional buyer power to squeeze its suppliers, shrinking farmers' and workers' share of the food dollar.'"

The merger, which could "cause conflicts with overlapping markets — Western Growers, the California Fresh Fruit Association, and Colorado Fruit & Vegetable Growers Association — submitted an additional letter to the FTC," Vitteck writes. "In it, the groups pointed to the Albertsons' acquisition of Safeway in 2015 — after which the company awarded contracts only to its largest produce suppliers, leaving smaller farmers to sell elsewhere — as an example of the negative outcomes that can be expected with a merger of this size." Their letter sums up the possible purchase: "The buying power of the newly combined Kroger entity cannot be understated."

Small farmers are already struggling to compete for sales to larger chain groceries. Vittek reports, "Farmers routinely sell their crops for less than what it costs to produce them. The pressure of farming with such small margins has led 'members to farm less acreage, move production to other countries when feasible, or leave farming altogether,' the letter from the Western grower groups read. If the Kroger-Albertsons merger is allowed to continue, competition among buyers will shrink, leaving farmers with fewer customers (in this case, grocery retailers) to work with."

American farmers face large-chain "take it or leave it" bargaining tactics, which can erase their profits, alongside competition from foreign growers. "The trade organizations that oppose the merger emphasize the harm done to American farmers as grocery retailers continue to source more foreign producers, who are ready, willing and able to undercut American producers on operating costs and the price they will accept from the retailer. . . . That is harmful for farmers, farmworkers and rural communities that depend on a robust agriculture industry.'"

The merged grocer would have 710,000 employees in 48 states, a workforce some would say already suffers from corporate greed. "Profiteering stands out at Kroger and Albertsons, with profits far outpacing worker wage growth or the cost of food," wrote Daniel Fleming and Judy Wood in a CalMatters op-ed. "Their outsize price hikes are at least partially responsible for inflation. Even while they were competing with each other, these companies jacked up prices and had record profits."

The Federal Trade Commission "is in no rush to approve the merger" because grocery prices are a big part of inflation, "a hot topic political issue that Republicans have pressed against President Biden," Thomas Lee reports for The Street.

Federal Trade Commission probes whether formula makers and distributors illegally limited supplies in rural stores

At President Biden's request, the Federal Trade Commission began investigating formula manufacturers on Tuesday to discover their role in the nationwide shortage. The investigation will focus on whether corporate mergers contributed to the shortage by reducing competition, and whether manufacturers and distributors illegally kept formula from going to smaller retailers in inner-city and rural areas, Spencer Kimball reports for CNBC. "The FTC also asked the public to submit comments to a federal website about whether any state or federal agencies may have accidentally taken actions that contributed to the shortage."

"Discriminatory terms and conditions can exacerbate the inability of some grocers, pharmacies, and other stores to source products in short supply, impacting both rural and inner-city communities in particular," FTC Chair Lina Khan said in a statement Tuesday.

Low-income rural parents are having an especially difficult time with the shortage. "When there are only one or two grocery stores in town, and when filling up the tank to drive from store to store to find formula — as many parents have been doing for weeks — is an economic impossibility, the need reaches a degree of intensity that is potentially life-threatening, Chabeli Carrazana reports for The 19th. "In rural swaths of the country, families are more likely to be living in poverty, more likely to be on WIC, more likely to face transportation barriers and less likely to have access to the retailers that carry baby formula."

Formula maker Abbott is expected to reopen its Sturgis, Mich., plant on June 4 and have some formula ready to ship by June 20. It could take six to eight weeks for formula to reach store shelves after that, Christina Jewett reports for The New York Times. Abbott is working with the Food and Drug Administration to remedy unsanitary conditions that led the FDA to shutter the plant in February.

Farming group coalition sends Federal Trade Commission a mammoth right-to-repair complaint about John Deere

"A broad coalition of agriculture interests has filed a complaint with the Federal Trade Commission against John Deere, demanding the right to repair their own equipment, Jesse Hirsch reports for The Counter. The 43-page complaint was filed for the National Farmers Union, other advocacy organizations and state farmers unions in Iowa, Missouri, Montana, Nebraska, Ohio, and Wisconsin.

"Currently, when a piece of John Deere equipment breaks down on the job, its owner is expressly forbidden from making their own fixes—only authorized, company-employed technicians have those permissions," Hirsch reports. "And even if you attempted to conduct your own repairs, you’d find it next-to-impossible, particularly on newer, computer-driven models. Deere locks down its proprietary knowledge tightly, and without company-provided diagnostic software and equipment, even getting a sense of what’s broken is virtually out of reach."

The complaint details how difficult John Deere has made it for farmers to repair their own equipment. The same themes keep coming up: "lengthy waits to get a Deere-authorized technician to service machinery; further waits for the actual repairs; crops and profits lost in the meantime; and overall frustration that a company making $6 billion annually can keep such a stranglehold on their own ability to do business," Hirsch reports. And, farmers complain, the company failed to follow through on a 2018 promise to make repair tools, software guides and diagnostic equipment available for farmers starting Jan. 1, 2021.

The Biden administration issued an executive order last year supporting right-to-repair laws and ordering the FTC to limit farm-equipment manufacturers from preventing such repairs, Hirsch reports. The FTC voted unanimously to adopt the order and has promised to crack down on companies like John Deer "with vigor." Complementary right-to-repair bills were introduced in the House and Senate in February, but haven't passed yet, Alex Gray reports for Successful Farming.