Day 3 of the Courts Review of the FTC v Kroger Merger

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Devastating Impact of Proposed Kroger/Albertsons Merger on Good Union Jobs Scrutinized in Day 3 of Merger Hearing, Economic Liberties

Portland, OR — After the third day of the Federal Trade Commission v. Kroger-Albertsons hearing in the U.S. District Court for the District of Oregon, the American Economic Liberties Project released the following summary. As posted by Research Manager Laurel Kilgour, reporting from Portland of the key arguments made and points discussed.

• Union Regrets Believing Albertsons’ Past Promises About Divested Stores
  • Andrea Zinder, President of UFCW Local 324 in Southern California, which represents over 15,000 workers across a wide range of industries, testified that following Albertsons’ 2015 merger with Safeway, their local believed promises that Haggen, the small third-party buyer of divested stores, would be a “good operator” that would keep existing bargaining agreements intact. Their local even advised senior members not to exercise their “bumping rights” to transfer to non-Haggen stores and instead give Haggen “a chance.” But six month later, Haggen filed for bankruptcy and those senior workers were “out on the street.” Zinder learned the hard way over 24 years of labor experience that there’s “always a negative effect on workers during mergers.”
• Senior Workers Unlikely to Stay If Inexperienced Buyer C&S Takes Over Divested Stores from Kroger and Albertsons
  • Zinder testified that senior workers likely could not be persuaded to stay in any stores that are divested to C&S due to their “very strong memory” of the “horrible experience” that resulted from Albertsons’ failed divestiture to Haggen. When she informed C&S of this reality, C&S was “very surprised” and sounded like they had no plan for how to run acquired stores without those senior workers.
•  A Kroger/Albertsons Merger Would Hurt Union Leverage Over Better Pay, Benefits, and Working Conditions
  • Zinder also testified that the ability to play “major” grocery employers off each other was important leverage to negotiate better contracts. Major grocery employers—which have greater store density and market share—“really control” wages and benefits, while “minor” players have to follow those terms to stay in business. The Kroger/Albertsons merger would take out a major player, and if C&S buys divested stores, it would only be a “minor” player. The union would lose negotiating leverage.
  • On cross examination, Zinder conceded that many tactics for generating leverage would remain “available” post-merger—but pointed out that those tactics “wouldn’t have the same impact” without competition. On redirect, she noted that a “strike is much less effective if consumers don’t have another place to shop with similar products and services.” The threat of losing sales is a significant part of why strikes—and the threat of strikes—matter.
• Another Union President, Who Initially Supported the Merger, Explains What Changed His Mind
  • UFCW Local 555 President Daniel Clay testified that although UFCW International voted “unanimously or near unanimously” to oppose the merger, and individual locals widely opposed it as well, UFCW Local 555 initially put out a press release supporting the merger shortly after meeting with third party buyer C&S. Clay was concerned that if Kroger did not buy Albertsons, an even worse buyer would come along, and he also initially believed Kroger’s promises about “investing in workers.” His recent experience attempting to negotiate a new contract with Kroger led him to “question the veracity” of Kroger’s post-merger commitments. He also came to doubt that the divestiture plan could work.
• Grocery Giants Withheld Divestiture Details from Unions Until Recently
  • Although UFCW Local 555 first asked Kroger and Albertsons back in December 2022 to identify which stores would be divested and how the divestiture plan would work, the grocery giants only provided that information within the past few months. And those details are concerning.
• Alaska Store Divestiture Plan Doomed to Fail
  • For example, Clay testified that C&S would pick up underfunded pension liabilities for Safeway/Carr stores in Alaska. “That’s a $90 million bill.” Clay’s concern was that if C&S is going to have to compete with Kroger, they’ll “have a hard time competing” if they are saddled with pension payments. Meanwhile, the new merged company would get to keep a valuable distribution center, putting C&S stores in the position of “buying groceries from a company they’re supposed to be competing against.”
• Kroger and Albertsons Coordinate with No Other Employers on Bargaining
  • John McPherson, Kroger Vice President of Associate and Labor Relations, confirmed that Albertsons is the only employer in the country that Kroger does multi-employer bargaining with, and also the only employer in the country that Kroger does coordinated bargaining with. This desire to align on terms and coordinate to jointly exert leverage to keep unions at the bargaining table is evidence that the companies are primary competitors in labor markets where they overlap.
• Kroger Price Matches Albertsons
  • Thomas Schwilke, President of the Dallas division of Ralph’s (owned by Kroger), testified that they emailed Cincinnati headquarters asking for more “pricing autonomy” to deviate from price recommendations—so that they could adapt to local prices from Albertsons stores (including Vonns and Pavilion banners). He testified that a “majority” of their stores are in competition with Albertsons stores.