Albertsons, Kroger CEOs face bipartisan skepticism in Senate hearing on planned merger

Top executives from the nation’s two biggest grocery companies insisted that the planned $25 billion merger between Kroger and Boise’s Albertsons would be beneficial to consumers, rather than harmful.

At a congressional hearing Tuesday, Kroger CEO Rodney McMullen said no stores, distribution centers or manufacturing facilities would close, and no “front-line” workers would be laid off, if the deal is approved by the Federal Trade Commission.

“This merger will allow us to compete even more,” said McMullen, who said he grew up in a union household and began his career stocking shelves at a Kroger store in Kentucky.

Legislators at a Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights hearing showed bipartisan opposition to the companies’ proposal, questioning how further consolidation of the supermarket industry could lower prices and improve service.

Democratic Sen. Amy Klobuchar of Minnesota said that if two stores are operated by the same owner, there’s less of an incentive to compete for customers. Klobuchar criticized Kroger, whose stores include Fred Meyer, for passing inflationary price increases onto customers.

Republican Sen. Mike Lee of Utah chided McMullen for comments he made in June 2021 on an earnings call with analysts. According to CNN Business, McMullen said “a little inflation is always good in our business.”

”Inflation, to put it gently, is wreaking havoc on our entire economy,” Lee said during the hearing. “But not in the grocery industry, it appears.”

The company’s operating profit increased from $2.8 billion in 2020 to $3.5 billion in 2021, about a 25% increase.

“These cost savings are unlikely to be passed onto consumers,” Sumit Sharma, a senior researcher at Consumer Reports, said at the hearing. “Why would any of those savings be shared with consumers unless competition incentivizes these companies to do so? These are, after all, profit-maximizing corporations.”

Sharma testified that in the Kroger Fact Book for 2021, the company lists Albertsons as one of its main competitors.

Albertsons CEO Vivek Sankaran defended the company’s decision in October to dole out $4 billion in special dividends to shareholders. He said the company hasn’t returned cash to shareholders since it merged with its rival Safeway in 2015.

“This $4 billion is a return of cash to those shareholders who have supported us over this decade,” Sankaran said. “It has nothing to do with the merger itself.”

But the company hasn’t yet been able to make the payments, thanks to a temporary restraining order granted to Washington state Attorney General Bob Ferguson. Earlier this month, Ferguson sued Albertsons and Kroger to block the grocery retailer from sending the payouts until state and federal antitrust regulators can review the merger.

As part of the proposed acquisition, Kroger announced commitments to spend $500 million to lower prices, $1.3 billion to update stores and $1 billion to increase employee wages. The commitments, totaling $2.8 billion, aren’t legally binding, but McMullen said they are part of the company’s business plan.

He said the investments are slated to begin on “day one” after the merger closes and roll out over four to five years.

“This merger will allow us to fulfill these commitments to our customers, our associates and our communities well into the future,” McMullen said.

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