The State of Colorado is seeking to block a proposed merger between two of the state鈥檚 biggest supermarket chains, Kroger (King Soopers and City Market) and Albertsons (Safeway). On Monday, the Attorney General鈥檚 office .
The state鈥檚 case is centered on the argument that the merger will eliminate healthy competition between grocers, allowing the new company to raise prices, mistreat workers and squeeze suppliers and farmers. Kroger, on the other hand, . It has also argued that its closest competitors are not other supermarkets, but other grocery retailers like Walmart, Costco and Amazon.
In addition to an end to the deal, the state is requesting that the court enforce a civil penalty of $1 million on each company for entering into an anti-competitive agreement. According to the , Albertsons agreed not to hire Kroger employees or solicit Kroger pharmacy customers during the 2022 United Food and Commercial Workers Strike at King Soopers.
Union Leaders will gather for a 鈥渟top the merger rally鈥� outside of the courtroom at noon on Monday. A Friday press release from United Food and Commercial Workers argued that the merger will 鈥渓ead to job losses; food and pharmacy deserts; negative economic impacts on the supply chain including farmers, ranchers, and transport; and less power for workers at the negotiating table.鈥�
Shoppers are concerned about prices
Attorney General Phil Weiser held nine community listening sessions and solicited 6,000 online comments on the merger last year, prior to filing the case. At a Thursday press conference, Weiser said that the feedback his office received was overwhelmingly negative.
鈥淐oloradans are concerned about this merger, about food deserts, about a lack of choices, about a lack of competition,鈥� he told attendees.
Earlier this week, shoppers at Safeway鈥檚 Arapahoe Avenue location in Boulder echoed Weiser鈥檚 claims.
鈥淭heir position is that they鈥檙e going to combine to reduce pricing,鈥� Boulder resident and CU Boulder student Eric Reid said. 鈥淏ut, history has shown that when monopolies occur, prices go up.鈥�
Boulder resident Jacob Graber cited elevated grocery prices during the COVID-19 pandemic as an example of the chains鈥� lack of concern for consumers.
鈥淭hey kind of screwed everybody during COVID. They made record profits,鈥� he said. 鈥淓verything is expensive. It鈥檚 going to stay up.鈥�
While it鈥檚 true that the grocery industry鈥檚 profits reached a high point during the pandemic, they have since fallen back to pre-COVID levels, .
Some shoppers, though, were tentatively optimistic that the merger could provide benefits.
鈥淚鈥檝e had so many instances at Safeway of not being able to find what I need,鈥� said Spencer Taliaferro. 鈥淚f they could converge supply chains, I think that it could be better for Safeway.鈥�
Kroger, which will buy out Albertsons in the proposed deal, has pledged to protect front-line jobs and lower prices by 10 to 12 percent in the stores it purchases. But, according to Weiser, these claims are not legally binding.
鈥淭hey鈥檙e not subject to legal oversight. They are literally paper promises,鈥� he said.
Local grocers say Kroger is already to big
Kroger , with Albertsons as a close competitor. Locally owned grocery stores are rare, and the ones that are left cannot outcompete supermarket chains鈥� prices.
The reasons behind this are complex, but one driving force is the outsized negotiating power that mega chains hold. Suppliers are willing to cut deals with chains in exchange for access to their market share, while small stores are left to pay higher prices.
Alison Steele鈥檚 family has owned local grocery stores in the front range for 80 years, starting with her grandfather. Today, she runs Niwot Market in Niwot. She said the mark-ups that local grocers have to pay have increased over time, making it harder to compete with mega chains outside of niche markets.
鈥淚t used to be the same price for everybody, and it鈥檚 just not like that anymore,鈥� Steele said. 鈥淪ometimes I鈥檒l go into those stores and I鈥檓 like, 鈥渨e can鈥檛 even buy it for what these stores are selling it for. It鈥檚 kind of hard to stomach.鈥�
Steele and others are concerned that further consolidation of the grocery industry will make it even harder for small stores. Rachel Irons is the co-founder of , a health food store that sells zero-waste bulk foods at locations in Boulder and Denver. She says that the merger could exacerbate forces that already make it hard to draw shoppers away from chains.
鈥淚t鈥檚 set up in a way that is really disadvantageous to the small people,鈥� said Irons. 鈥淢erging these bigger companies just compounds the problem.鈥�
鈥榃e have work to do,鈥� says Colorado attorney general Phil Weiser
Perhaps in anticipation of antitrust litigation, Kroger made plans to sell off some stores, plants and distribution centers to a third company, C&S Wholesale Grocers, if the merger goes through. The plan is meant to create a new, much smaller competitor to replace Albertsons.
to sell a portion of its stores to the grocery chain Haggen when it bought Safeway in 2014. Two years later, Haggen filed for bankruptcy and sold the stores back to Albersons. At Thursday鈥檚 press conference, Weiser warned that a similar fate could befall C&S.
鈥淐&S is a national distribution company. It operates very few stores. It doesn't have the infrastructure or the platform to do so.鈥� he said. 鈥淲e鈥檙e worried about a repeat of what we saw last time.鈥�
Colorado鈥檚 case is one of three legal challenges that Kroger and Albertsons face 鈥� the Federal Trade Commission and the State of Washington have also brought legal action against the merger. The federal trial , but none of the trials have reached a verdict yet.
Weiser warned that, even if a verdict is reached on the federal case before the Colorado trial is over, the companies are likely to appeal.
鈥淯ntil the parties walk away from the merger, or a court stops it and the parties accept the ruling of the court, we have work to do,鈥� he said.
