“FTC Previews Hard Evidence of Harms While Kroger and Albertsons Dangle Unenforceable Promises in Merger Hearing Opening Arguments,” Economic Liberties Kroger and Albertsons Dangle Unenforceable Promises in Merger Hearing Opening Arguments. Noteworthy in Day 1 of the hearing is Kroger uses Albertson’s pricing as the high mark to set its pricing between it and WalMart on the low end. It would seem such a combination of both stores would eliminate the pricing competition. The later adjusts to the former prices. Also in the mix is the percentage of stores make of the market in cities. For example. Santa Fe was one of the locations used to show that such combination would result in ~60% of the stores being either Kroger or Albertsons. ~~~~~~~
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“FTC Previews Hard Evidence of Harms While Kroger and Albertsons Dangle Unenforceable Promises in Merger Hearing Opening Arguments,” Economic Liberties
Kroger and Albertsons Dangle Unenforceable Promises in Merger Hearing Opening Arguments.
Noteworthy in Day 1 of the hearing is Kroger uses Albertson’s pricing as the high mark to set its pricing between it and WalMart on the low end. It would seem such a combination of both stores would eliminate the pricing competition. The later adjusts to the former prices. Also in the mix is the percentage of stores make of the market in cities. For example. Santa Fe was one of the locations used to show that such combination would result in ~60% of the stores being either Kroger or Albertsons.
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Portland, OR — Following opening arguments in the Federal Trade Commission v. Kroger-Albertsons hearing in the U.S. District Court for the District of Oregon, where the Federal Trade Commission (FTC) and nine State Attorneys General are seeking a preliminary injunction to hit “pause” on the biggest supermarket merger in history, the American Economic Liberties Project released the following statement.
“The FTC’s opening argument previewed concrete evidence that a Kroger-Albertsons merger would lead to higher prices for millions of Americans and worse working conditions for hundreds of thousands of workers,” said Laurel Kilgour, Research Manager at the American Economic Liberties Project, who attended the hearing in Portland yesterday.
“By contrast, lawyers for Kroger and Albertsons touted fake promises of utopian outcomes that are not legally enforceable. Indeed, Albertsons has a track record of profiting from similar fake promises that turned out disastrously for competition and for communities, and this time is no different; token divestitures of a fraction of stores to inexperienced grocery operators did not preserve competition then and that sham tactic is destined to fail again here. We encourage the court to reject the false urgency concocted by the defendants’ lawyers, and hit ‘pause’ long enough for this ill-conceived deal to be more thoroughly scrutinized through administrative proceedings as Congress intended.”
“Given that thousands of communities depend almost exclusively on their local Kroger and Albertsons stores for everyday essentials, the idea that they must merge to compete more vigorously for food dollars falls flat,” added Kilgour. “At a time when working families are especially concerned with costs and access to food, we need more—not less—competition between grocery stores on prices, wages, the freshness of produce, and service quality.”
Key points from opening arguments in the hearing, which took place in Portland, Oregon, include:
The corporations also compete as employers. Both have unionized workforces which depend on being able to play employers off each other through credible threats that they will go on strike in order to win higher wages and safer, better working conditions. With fewer employers in the labor market, unions would lose that leverage.
There is currently robust head-to-head competition between Kroger and Albertsons across multiple lines of commerce.
A merger between Kroger and Albertsons would increase market concentration in thousands of communities across the country, and the loss of competition in any single geographic market is sufficient to meet the Federal Trade Commission’s burden of proof.
The FTC flagged harms in a variety of locations where Kroger and Albertsons currently compete. To take just one example, in Santa Fe, New Mexico, Albertsons has a 37% market share, while Kroger has a 22% market share. Post-merger, that market share would jump to 59%, and the combined entity would own five out of eight options in the area. Kroger has not proposed the divestiture of any stores in Santa Fe to off-set this clear loss of competition. That’s true in other communities as well, like Corvallis, Oregon, where Kroger and Albertsons control 60% of the market
The two corporations view each other as a primary competitor.
Kroger invests millions of dollars in at least two types of pricing strategies that have the effect of reducing their price below Albertsons prices – pricing parity (i.e., charging the lowest price), and the high-price retail rule (HPR).
Kroger’s high-price retail (HPR) rule uses low-cost retailers like Walmart to set a price floor, then targets a range of prices up to a ceiling set by Kroger’s highest price retail competitor, often Albertsons. This “price ceiling” model is further proof that Kroger views traditional supermarkets, like those operated by Albertsons, as their primary competitor. In response, Albertsons often lowers its price ceiling to prevent Kroger from under-cutting it on price.
Albertsons’ pricing tool makes price recommendations based on “a primary food competitor”– which in many markets, is usually a Kroger store.