There is a fight over whether Kroger and Albertsons should be allowed to combine.
On Tuesday, leaders of the two companies defended their proposed merger at a congressional hearing in Washington, where they faced a number of questions about how the deal could shake up the competitive landscape.
The Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights held a hearing on the topic. Customers can make a right or left turn.
In October, Kroger announced plans to acquire the grocery store chain. According to a market researcher, the Cincinnati-based company is the second largest grocery store in the US, behind Walmart. Kroger and Albertsons are close to Walmart.
At the hearing Tuesday, McMullen said that the combined company could help lower food prices and improve the customer experience at a time when grocers are racing to adapt to online shopping. Retailers have to keep reinventing themselves to stay relevant.
The United Food and Commercial Workers, a major grocery union that represents thousands of the grocers' employees, has opposed the proposed merger.
The hearing was chaired by Sen. Amy Klobuchar, a democrat from Minnesota. Both challenged the companies on their actions, including Kroger's $1 billion in share buys announced last year and plans to pay dividends to shareholders.
The proposed deal comes at a time when groceries are taking up more of a family's budget. Food prices have gone up as inflation goes up. Butter, eggs, poultry and milk prices have gone up by double-digits from a year ago.
There is a preview of the antitrust battle to come.
The argument is that combining will help them weather changes. Thin margins are being eaten by online grocery sales. Traditional grocers are being pressured by new players such as deep discounters and e- commerce players.
The competition for consumers has become fierce in the marketplace for groceries over the past 10 years, according to the CEO of the company. A merger with Kroger will be the best way to compete with Walmart and Amazon.
He argued that the combined company would still be small compared to other companies.
The members of the UCFW shared their concerns at a press conference ahead of the hearing. Their main concern was the loss of their pension plans and higher food prices.
Employees who are members of the union remember the impact of previous mergers. Judy Wood said she and her coworkers were shocked by the store closings that occurred after the merger of Safeway and Albertsons.
The union members were against the private equity firms that will benefit from the proposed $4 per share special dividend. According to Factset, Cerberus Capital Management has a stake in the grocery store chain. The dividend is on hold because of a court ruling.
The company doesn't plan to close stores or lay off employees, but will work with the FTC to spin off stores for competitive reasons.
Kroger said in its original proposal that it already had a plan to deal with concerns about the merger. The FTC would be involved in deciding which stores would be part of the spinoff company.
The company is talking to unions about the deal and what it means for its workers. The deal would allow for more opportunities for employees. He said that Kroger will spend $1 billion on higher wages and better benefits after the deal closes.
His job security is created by a successful business. We think that our business will create job security.
The deal was opposed by some grocery competitors.
Walmart and Amazon use their size to pressure suppliers for lower prices and better terms, according to Michael Needler, the CEO of Fresh Encounter. He said that the Kroger-Albertsons deal would make it hard for smaller grocery stores to compete.
He said that larger grocery stores have been running campaigns against his chain by giving away free groceries.
He doesn't know any other way to point out predatory pricing.
At the hearing, a senior researcher at Consumer Reports said that he does not see any benefits to combining the companies. He said retailers wouldn't have the reason to raise wages. Shoppers would have less options.
Competition will be taken out of the market even if they sell a small number of stores. Prices will increase.
Amelia Lucas was a contributor.
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