These Grocery-Store Chains Want to Cripple the FTC
The Federal Trade Commission is trying to stop the merger of two of the US’s largest grocery-store chains, Kroger and Albertsons. In response, the companies are suing to undermine the FTC and dismantle the country’s antitrust machinery.
A worker pushes shopping carts outside a Kroger grocery store in Dallas, Texas, on Wednesday, February 21, 2024. (Shelby Tauber / Bloomberg via Getty Images)
As Vice President Kamala Harris campaigns on tackling skyrocketing grocery prices, two of the country’s largest grocery chains are doing everything they can to merge into a price-gouging behemoth.
As legal proceedings began on Monday, August 26, to stop the merger of Kroger and Albertsons, behind the scenes the companies have spent millions in corporate lobbying, sued to dismantle the country’s long-standing antitrust machinery, and even erased potentially incriminating evidence about “the merger’s anticompetitive impacts,” according to court documents reviewed by the Lever.
If successful, the chains’ efforts might not just raise prices, limit product diversity, and harm workers — they could cripple government agencies working to investigate corporate malfeasance and protect consumer rights.
“Companies raise the stakes of these [antitrust] cases, and they’re basically attempting to intimidate and drain [federal regulators] out of challenging mergers,” said Basel Musharbash, an attorney with the Antimonopoly Counsel, a law firm focused on antitrust and policy issues affecting rural America.
In October 2022, Kroger — the country’s largest supermarket chain — announced an agreement to acquire Albertsons — the country’s second-largest supermarket chain — for $24.6 billion. The merger, if allowed to go through, would create a massive conglomerate of nearly 5,000 stores and 710,000 employees, making it the third-largest private sector employer in the nation, behind Amazon and Walmart.
In February 2024, the Federal Trade Commission (FTC) sued to block the merger, saying that it would lead to less competition, “lower quality products,” and “erase aggressive competition for workers.”
“This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years,” said Henry Liu, director of the FTC’s Bureau of Competition. “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.”
A three-week hearing related to the lawsuit began on August 26, in which the FTC is attempting to temporarily halt the merger while a more thorough case on the matter is being argued before the FTC’s internal administrative court sometime in the near future.
But in a lawsuit filed August 19 in federal court in Cincinnati, Ohio, Kroger — which owns Dillons, Fred Meyer, Harris Teeter, King Soopers, Ralphs, and other stores — alleged that the FTC’s internal administrative court, which hears arguments on evidence and issues an initial decision on antitrust matters, is unconstitutional. Experts say Kroger is seeking to sidestep nearly a hundred years of precedent and instead have a federal court rule on the merger.
Kroger issued a statement the same day it sued the FTC claiming that the agency’s actions in blocking the merger were “unconstitutional.”
“The merger between Kroger and Albertsons is squarely focused on ensuring we bring customers lower prices starting day one while securing the future of good-paying union jobs,” Kroger CEO Rodney McMullen said in an August 19 press release. “We stand prepared to defend this merger in the upcoming trial in federal court — the appropriate venue for this matter to be heard — and we are asking the court to halt what amounts to an unlawful proceeding before the FTC’s own in-house tribunal.”
Three days earlier, FTC investigators had highlighted in a new court filing that they found evidence of Albertsons executives deleting text messages that appear to discuss details of the proposed Kroger-Albertsons merger after the company was ordered to preserve evidence related to the merger.
Kroger did not respond to a request for comment, and Albertsons declined to comment on the deleted texts.
Albertsons — which owns Acme Markets, Jewel-Osco, Safeway, Shaw’s, Vons, and other stores — has also spent more than $7.6 million since January 2022 lobbying Congress, the White House, and other regulators on “outreach regarding proposed merger with Kroger,” antitrust issues, competition, and supply-chain issues, among other matters, disclosures show.
Kroger did not report lobbying on the merger or antitrust issues, but the company has spent more than $4.2 million since January 2022 lobbying the White House, Congress, the FTC, and other regulators on “pending business transactions,” corporate taxes, food benefits, and other issues, disclosures show. Kroger also hired former House Speaker John Boehner (R-OH) to “provide strategic counsel” to Kroger officials on issues related to the merger.
The stunning legal gambit by Kroger, and potentially illegal actions by Albertsons executives, come as Harris vows to enact federal bans on grocery price gouging, or excessively raising prices. Grocery prices have spiked roughly 25 percent since the pandemic.
Details of Harris’s plan will be announced at a later date, her campaign said.
Republican presidential candidate Donald Trump claimed that Harris’s vague promise to combat high food costs was akin to “Soviet-style price controls.”
But nearly every state has already passed some controls on price gouging, and federal data and investigations suggest grocery-store executives are artificially raising prices to juice profits.
Supply-chain disruptions were initially blamed for recent price spikes, but a March report from the FTC highlights how grocers and food suppliers used the pandemic to artificially raise prices.
“Some firms seem to have used rising costs as an opportunity to further hike prices to increase their profits, and profits remain elevated even as supply chain pressures have eased,” FTC investigators found.
Additionally, as the country has been grappling with rising inflation, Kroger executives admitted on a 2021 shareholder call that inflation is a good thing because it allows the company to raise prices, pass the cost to consumers, and keep prices high.
“We view a little bit of inflation as always good in our business, and we would expect to be able to pass those costs through to customers on things that are permanent in nature,” McMullen, Kroger’s CEO, said at the time.
In an attempt to allay concerns from the FTC, Kroger has recently promised to sell off nearly six hundred stores, slash prices by $1 billion, and invest $1 billion in wages if the merger is allowed to go through. But critics say the offer reads like a threat to keep inflating prices and shortchanging workers if the chain doesn’t get what it wants — and suggests the corporation has more power over higher prices than it’s willing to admit.
“This suggests that [Kroger is] keeping prices above where they need to be, which suggests that they have some market power at present,” Musharbash said. “And if they have market power presently, why should we let them merge and gain more market power to keep prices high?”
The Case of the Missing Texts
Deleting text messages and other electronic messages has apparently become a go-to tactic for business executives facing government oversight in recent years.
Earlier this year, the FTC accused Jeff Bezos, founder of Amazon, and other top Amazon officials of purposefully deleting text messages that could be used against them during an ongoing antitrust case.
Bezos claimed that the messages were sent on Signal — an encrypted messaging app — and were set to auto-delete after a certain amount of time. But Bezos and other executives kept auto-deleting such messages even after Amazon was ordered to preserve messages and documents related to the antitrust case in 2019.
“I may have made mistakes in that regard from time to time,” Bezos told investigators. “I never would have used Signal under any circumstances with disappearing messages on or off to discuss any complicated business issues. It just doesn’t make sense.”
Court filings released in 2023 found that Google executives also failed to save messages related to an antitrust case in 2021. Google executives directed their employees to use a feature that automatically deletes Google Chat messages after twenty-four hours. Once Google received an order to preserve messages, a judge found that executives did not properly notify employees to stop using the auto-delete feature.
“The Court concludes that Google intended to subvert the discovery process, and that Chat evidence was ‘lost with the intent to prevent its use in litigation’ and ‘with the intent to deprive another party of the information’s use in the litigation,’” the judge overseeing the case wrote in 2023.
Albertsons executives were notified by FTC investigators of missing text messages in October 2023. The next month, Albertsons told investigators that the missing messages “may have been because of settings on the iPhone that automatically delete files after a period of time,” according to court documents.
Albertsons was able to recover roughly seventy text messages sent from CEO Vivek Sankaran’s phone, and investigators noted that three other executives “continued to delete text messages well after the FTC’s investigation began.”
“Of the eight Albertsons’ executives set to testify at this evidentiary hearing, four exhibited a pervasive practice of deleting business-related text messages,” investigators wrote.
The investigators added that the deleted messages allegedly included details on whether selling off certain stores “will remedy the merger’s anticompetitive impacts” and urged the court to view the executives’ testimony “with skepticism.”
“This is another indication that Kroger and Albertsons are trying to avoid government oversight and law enforcement because they know that this merger should be struck down,” said Morgan Harper, a lawyer focused on monopoly policy at the American Economic Liberties Project, a nonprofit advocacy group that focuses on concentrations of economic power. “It’s bad for consumers, it’s bad for workers, and it’s bad for the economy.”
The FTC Is Unconstitutional
Kroger is now trying to kill the FTC’s case against the merger by claiming an internal FTC court that rules on such matters is unconstitutional. According to Kroger’s new lawsuit, the main thrust of the corporation’s argument is that the merger, which involves “Kroger’s private rights,” is being ruled on within the “executive branch rather than the judicial branch, in violation of Article III of the Constitution.”
Such a tactic has been used before and failed, said Harper.
“We’ve seen this from a lot of different large corporations, and instead of fighting on the merits, they’re starting to question the constitutionality of the Federal Trade Commission,” Harper told the Lever. “It’s unfounded, it’s been struck down before, and this is why we have to get a handle on judicial forum shopping that encourages institutions to take this approach when they’re facing government oversight.”
But recently, corporate attacks on government agencies have started racking up wins due to corporate-friendly federal judges and Supreme Court justices.
Earlier this summer, the Supreme Court ruled that the in-house courts issuing civil penalties for securities fraud for the Securities and Exchange Commission are unconstitutional. Kroger cited this case — called SEC v. Jarkesy — in its lawsuit against the FTC.
“Under that line of precedent, it is unconstitutional for the FTC to adjudicate Kroger’s private rights administratively rather than in federal court,” Kroger claims. “The remedy for these constitutional violations is to enjoin the administrative proceeding.”
Kroger is also relying on a 2023 Supreme Court ruling — Axon Enterprise, Inc. v. Federal Trade Commission — that allows companies facing FTC enforcement actions to challenge actions the company deems to be unconstitutional in federal court before the internal FTC court deliberations are finished.
The US Chamber of Commerce, a corporate-advocacy group, called the Supreme Court’s ruling “a major victory for the business community.”
Legal experts say the Axon and Jarkesy decisions could have major ramifications for federal agencies for decades to come, because they allow companies to challenge agency authority and eat away at their ability to regulate big businesses.
The Axon decision in particular can allow companies to attack the structure of the FTC and “could empower companies under investigation to preemptively sue the FTC before the FTC files an administrative complaint,” noted Holland & Knight, a law firm focused on class-action defense, corporate law, and other issues, in 2022.
“This would also open the door for challenges to the structure of administrative processes of other government agencies,” the firm added.
Poor Food Quality and Fewer Employment Options
Kroger claims that merging with Albertsons would allow it to compete with other grocery giants like Amazon, Costco, and Walmart. In the lawsuit against the FTC, Kroger says the consolidation would allow competition and “greater choice at lower prices for the American public.”
But experts are skeptical of these claims and foresee negative downstream consequences if the merger is allowed to go through.
For starters, the merger could result in a loss of pricing and product-quality competition among stores. The merger could allow Kroger and Albertsons to combine all of their in-house products under one company, which could result in a loss of choice for consumers.
Limited choice could result in poor quality foods packed with emulsifiers, natural flavors, and other additives that can be bad for human consumption, said Thomas Gremillion, director of food policy for the Consumer Federation of America, a consumer-advocacy group.
“When you have some [different] shops, you can sort of vote for the type of product you want, whether it’s a clean-label type thing — like humanely raised livestock products,” Gremillion told The Lever. “But when you have just one or two big food retailers, you just have to take or leave whatever they’re offering.”
Competition could also be limited among grocery-store suppliers, the companies whose products stock the shelves and sit on fruit stands, Musharbash said.
Large grocery store chains often contract with farmers and shipping associations that are responsible for producing and delivering meats and produce. Large grocers often contract with only two or three of these associations, limiting financial options for grower-shippers, especially if there is market consolidation.
If there are fewer stores available for these grower-shippers to sell to, the remaining options can demand price reductions, Musharbash said.
“Which makes it harder for those grower-shippers to succeed, but it also entrenches them in place and makes it so that there are fewer and fewer grower-shippers,” he added. “It drives consolidation at that tier, which in turn depresses compensation for farmers.”
Earlier this year, Kroger defended the proposed merger by highlighting its relationship with a blueberry grower that the Lever found had hired a labor contractor accused of operating one of the largest trafficking rings in US history.
Critics also say the Kroger-Albertsons merger could harm retail employees by decreasing the number of companies competing for employee wages, benefits, and other workplace perks.
The United Food and Commercial Workers International Union, which represents more than 1.2 million grocery-store, meatpacking, food-processing, and other food-industry workers across North America, opposed the merger in 2023 and supported the FTC’s 2024 lawsuit seeking to block it.
“The FTC’s decision reflects clear concerns over the impact such a megamerger could have on workers, food prices, and millions of customers,” the union said in a February statement.
Concern appears to be mounting over the potential merger’s negative impacts.
Eight states and the District of Columbia have signed on to the FTC lawsuit.
The states of Colorado and Washington are pursuing their own cases to block the merger nationwide. Both states’ Attorney General’s Offices claim that the merger would “eliminate head-to-head competition” between the two stores, resulting in fewer employment options for employees and higher prices for consumers.
Meanwhile, consolidation among grocery stores and meatpackers has skyrocketed in the past decades.
The top four grocery-store chains accounted for more than 30 percent of all sales in 2019, up from just 15 percent of sales in 1990, according to federal data. Additionally, the top four beef packers controlled 85 percent of the market.
If consolidation continues in the grocery sector, it could have ripple effects in other industries — especially if antitrust watchdogs are stripped of some of their authority.
“Even though inflation is coming down, the [food] costs that have increased over the past few years are difficult for many families to manage, and this is going to give Kroger more pricing power in the market that they can then pass along to consumers as higher prices,” said Harper with the American Economic Liberties Project. “Importantly, Kroger can pass [those high prices] along to other businesses, and this might then incentivize further consolidation in the food market overall.”