As part of the agreement, Kroger, which will acquire Albertsons, has promised to preserve front-line employment and reduce prices by 10 to 12 percent.
The State of Colorado is preventing a proposed merger between Albertsons (Safeway) and Kroger (King Soopers and City Market), the largest supermarket chain in the state. The attorney of the firms and the Attorney General’s office will face off in a Denver District courtroom on Monday.
The main argument of the case is that the merger will end the healthy competition between the grocers, allowing the new business to hike prices, mistreat employees, and pressure farmers and suppliers. Kroger claims it will reinvest its revenue to decrease prices at Albertsons shops. It continues to argue that its main rivals are Walmart, Costco, Amazon, and not other supermarkets.
The state wants the court to impose a $1 million civil penalty on each company for entering into an anti-competitive contract. Albertsons agreed not to recruit Kroger workers or approach pharmacy consumers during the 2022 United Food and Commercial Workers Strike at King Soopers.
Union leaders assembled on Monday to protest against the merger outside the courtroom since they argued that it would lead to job losses, reduced power for workers at the negotiating table, and adverse economic impact on the supply chain.
How are the consumers affected by the prices?
Attorney General Phil Weiser requested 6,000 online comments on the merger, hosted nine community listening sessions, and stated that most of the comments he received were negative.
Consumers who visited Boulder Safeway confirmed the claims.
Jacob Graber, a resident of Boulder, used to pay high grocery prices during COVID-19, which shows disregard for the company towards its consumers.
As much as supermarket profits have peaked during the pandemic, they have returned to their pre-pandemic levels, according to research by the Food Industry Association.
However, some shoppers were optimistic about the merger.
Some people commented that it is sometimes hard to find items in Safeway, and it could benefit if the supply chains are combined.
As part of the agreement, Kroger, which will acquire Albertsons, has promised to preserve front-line employment and reduce prices by 10 to 12 percent. Weiser, however, claims that these assertions are not enforceable. He claimed that these are just paper promises.
Local food vendors say that Kroger is already too large. Kroger is already dominating the grocery business, followed by Albertsons. There are not many locally-owned grocery businesses, and they cannot compete with the costs of supermarket chains.
One of the main reasons behind this is the outsized bargaining power that mega-chains have. Small retailers pay higher rates because suppliers are willing to deal with chains to access their market share.
Alison Steele’s family has owned the local grocery businesses in the front range for 80 years. She currently runs Niwot Market in Niwot. She claimed that local grocers are finding it difficult to compete with mega-chains due to the markups they must pay.
Steele and others fear that any supermarket consolidation will make things much more difficult for small businesses. Rachel Irons runs Nude Foods Market, a health food store that sells zero-waste food, and argues that it might be difficult to drive customers away from chains due to mergers.
If the merger goes well, Kroger has planned to sell a part of its stores, facilities, and distribution centers to C&S Wholesale Grocers due to the antitrust lawsuits. The idea is to establish a new and smaller competition to replace Albertsons.
When Albertsons purchased Safeway in 2014, it made a similar agreement to sell a portion of its stores to the supermarket chain Haggen. Haggen declared bankruptcy two years later and returned the stores to Albertsons. Weiser cautioned that C&S might suffer a similar fate.
C&S is a nationwide distributor which runs a small number of stores. It lacks the platform or the infrastructure necessary to accomplish this.
The Federal Trade Commission and the State of Washington have also filed lawsuits against the merger, making Colorado’s case one of three that Kroger and Albertsons are facing in court. Though none of the cases have resulted in a verdict, the federal trial was the first to conclude last week.
Weiser predicted that the businesses would probably file a defense even if a decision is made in the federal case before the Colorado trial is over.