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A customer exits a Kroger grocery store on Sept. 9 in Houston, Tx. |
The two biggest grocery store chains in the United States, Kroger, and Albertsons will merge through a $24.6 billion purchase, the firms said on Friday.
Given that it would create a new grocery behemoth at a time of skyrocketing food prices, the merger is sure to attract heavy scrutiny from federal authorities and opponents. In September, grocery prices increased 13% over the same month last year.
With 420,000 people and over 2,700 shops, including Ralphs, Harris Teeter, Fred Meyer, and King Soopers, Kroger is the largest grocery chain in the United States. With 290,000 workers and over 2,300 locations, including Safeway and Vons, Albertsons is the second-largest grocery chain in the nation.
They cross paths in a number of marketplaces, primarily in the west of the nation. According to the corporations, their partnership would require spinning off up to 375 locations into a different entity.
In its announcement on Friday, Kroger stated that it will invest $1 billion to increase salaries and benefits for employees, as well as "reinvest about half a billion dollars in cost savings through synergies to cut prices for customers."
As a major national big-box retailer that sells more groceries than Kroger and Albertsons put together, Walmart is a major rival for both businesses. The two are also up against competition from Costco, Amazon, and recently, dollar shops, the sector of American retail with the highest growth.
The Biden administration's antitrust enforcers have argued for modifications to the federal government's merger policy and have opposed megadeals due to their disproportionately negative effects on consumer pricing and competition.
According to William Kovacic, a former attorney and head of the Federal Trade Commission, Kroger and Albertsons would "get a far deeper review than past deals received in this industry." They'll encounter a lot more doubt over the possible advantages of the consolidation,
However, according to Kovacic, a law professor at George Washington University, the federal competition authorities have also recently lost in litigation on certain attempts to prohibit mergers.
In light of this, he predicted that the FTC review would be challenging. It does not imply that, should the FTC choose to dispute the arrangement in court, it will unquestionably win.
For a long time, the top solo grocery chains in different regions of the country were Kroger, Albertsons, and Safeway. Albertsons merged with Safeway in 2015, then unsuccessfully tried to merge with pharmacy chain Rite Aid in 2018, and eventually went public in 2020.
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