In an attempt to facilitate FTC approval of the proposed merger with Albertsons, Kroger committed to reducing shelf prices among the combined stores by $500 million following completion of the $25 billion transaction. The question arises as to whether this was window dressing to influence the FTC towards a positive outcome? In the event the offer was unsuccessful given the action by the Agency on February 26th. Alternatively offering to reduce prices may have represented an exercise in predation to attract clientele following the merger with subsequent ratcheting up of prices. We have seen this movie before.
Kroger Company also offered to invest $1.3 billion in upgrades of Albertsons stores. Similar promises to cut prices and improve stores were made before acquisition of the Harris Teeter chain. At the present time, Harris Teeter, regarded as an “upmarket” banner has prices considerably higher for the same items than local North Carolina competitors including Food Lion.
Before releasing their decision the FTC had time to review the merger and consulted with the two unions, state Attorneys General and other parties involved. This suggests that they will be able to defend their decision to block the transaction given the inevitability of a hearing before an Administrative Law Judge and subsequent prolonged litigation.
Kroger continues to promote the transaction that would increase the market share of the combined companies to compete with Walmart the leader in grocery retail and on-line sales. To support their position Kroger and Albertsons have established a joint website emphasizing the potential cost savings for consumers.
Irrespective of whether shoppers would have benefitted over the short term, the proposed merger had negative implications for suppliers, especially those west of the Mississippi.