FTC blocks Safeway-Fred Meyer merger

National news on the proposed merger of Kroger (Fred Meyers) and Albertsons (Safeway) could potentially affect the Peninsula and Interstate Fred Meyers and St. Johns Safeway. The two parent companies of the stores proposed a $24.6 billion merger in 2022. 

St. Johns Safeway
St. Johns Safeway

On Monday, February 26, Federal Trade Commission (FTC) announced its decision on the merger. They will move to block it.

The role of the FTC is to examine whether a merger increases the risk of monopoly. The agency can take legal action to block deals it believes would “substantially lessen competition.” 

With already soaring food costs, critics have warned that the giant grocers’ promises of more competition and lower prices for consumers are not likely to occur.

According to media sources, the two stores began discussing selling more than 400 locations throughout the country to C&S Wholesale Grocers as a way of securing regulatory approval. They claimed the sell-off would maintain competition. 

A similar sell-off of stores occurred as part of the 2014 Albertsons–Safeway merger. In that case, 146 of 168 stores went to Haggen, but less than a year later Haggen filed for bankruptcy and closed 127 of the acquired stores. “It then sued Albertsons, alleging in part that Albertsons overstocked stores with perishable fruit and meats, provided inaccurate pricing information which contributed to higher prices, and failed to perform necessary maintenance on stores and equipment.” (promarket.org). 

FTC cited the current sell-off proposal to C&S as inadequate to protect competition. Critics say it is unlikely C&S has enough retail experience to handle a sudden large increase in its retail operation.

One of the country’s leading anti-monopoly advocates called the sell-off a ploy. “They are merging because they want market power,” said Matt Stoller, research director at the American Economics Liberties Project, an anti-monopoly group. “If they had enough [sell-offs] to make the merger legal, then it wouldn’t be worth it for them. The crime is the point.”

He said mergers eliminate competition, leaving suppliers, customers, and workers with fewer choices.

Unions fight merger

On Oct. 13, 2022, the same day Kroger and Albertsons announced the merger, Seattle-based United Food and Commercial Workers (UFCW) Local 3000 and five other local unions blasted the deal in a public statement. A coalition representing more than 100,000 Kroger and Albertsons workers has been working together to fight it.

In any neighborhood where both an Alberstons/Safeway store and a Kroger/Fred Meyer store remain, union representatives have asserted that layoffs are more likely to occur because the new company would probably consolidate stores to save money. “Why have two fully staffed locations if you could pay for half the staff and force shoppers to go to one store because they have no other choices?” said a UFCW representative.

In the St. Johns neighborhood St. Johns Safeway and Peninsula Fred Meyers are just one mile apart. A merger could jeopardize jobs if one of them closes. In the 2014 Safeway/Albertsons sell-off debacle, Haggen’s closure of 127 stores led to 5,000 worker layoffs.

John Marshall, a UFCW financial analyst, sees similar red flags with the C&S deal, which he calls “Haggen 2.0.” C&S is primarily a wholesaler, not a retail grocer. It has 160 retail stores, but most are franchises run by independent operators. In total, Marshall estimates that C&S operates about 55 stores. If it acquired 413 stores, it would increase eight-fold in size suddenly, just like Haggen had.

An Albertson’s spokesperson has labeled the criticism “misleading.” In response to the FTC action Kroger added that “The merging parties look forward to litigating this action in court so we can deliver the benefits of this merger to communities across America–lower prices, more choices, and more good-paying union jobs for decades to come.”