Alaska’s senators told the Federal Trade Commission in a letter last week that the companies behind a $25 billion deal that would combine Fred Meyer and Carrs Safeway grocery stores haven’t shown how it will benefit Alaska consumers.
The senators also said the proposal might even violate federal merger guidelines, and they asked the agency to closely review potential impacts to Alaska’s small and isolated grocery market, according to a 2-page letter to Lina Khan, chair of the agency, dated Friday.
“We can say with great confidence that this potential merger has Alaskans justifiably on edge and that the track record of grocery store consolidation in our state does not bode well for Alaskans’ food security, affordability, and our dedicated workforce,” Republican Sens. Lisa Murkowski and Dan Sullivan said in the letter.
Officials with Kroger, the parent company of Fred Meyer, and Albertsons, parent of Carrs Safeway, have said they will not close stores and will protect unions, while increasing wages and benefits. They have said they will invest to improve the customer experience and reduce prices.
The letter comes as other Alaska officials and groups are pushing back against the merger. The Anchorage Assembly at its meeting on Tuesday plans to weigh in on the issue with a resolution that could call on the agency to halt the proposed merger, amid data showing that Fairbanks and Anchorage are among the nation’s most expensive markets for groceries.
The retail giants announced their proposal last year. If approved, the deal would combine the nation’s two largest grocery store chains, with Kroger the largest. It would affect 5,000 stores nationally serving more than two-thirds of U.S. households and employing 700,000 workers.
Amid concerns about the merger’s impact on competition, the companies earlier this month announced a $1.9 billion divestiture plan that includes the sale of more than 400 stores across several states, including 14 Albertsons-owned stores in Alaska, to C&S Wholesale Grocers. The New Hampshire-based grocery supplier and retailer, one of the nation’s largest privately held companies, operates Grand Union and Piggly Wiggly groceries in the Midwest and the Carolinas.
The letter from the senators on Friday marks their most extensive public comments on the proposal.
The senators do not ask Khan to stop the merger, but they raise a variety of issues and call on the agency to set a strong standard for approval.
[Earlier coverage: What the proposed Albertsons-Kroger merger could mean in Alaska]
“The agreement proposes to sell 14 of 35 existing Carrs-Safeway stores currently owned by Albertsons to C&S,” they write. “Based on this news, we write to express our deep concerns about the agreement and the potential impacts the proposed merger will have on Alaskans. There are simply too many unanswered questions and unforeseen consequences over the horizon should this merger be approved. When reviewing this proposed merger, we ask that you and the Federal Trade Commission (FTC) set a very high approval bar and consider the following issues that are essential to Alaskans’ well-being.”
“Although Kroger’s divesture announcement does not specify where the 14 transfers of ownership will take place, the sales will likely occur where stores are near one another,” they write. “The likely result is that in Alaska’s most populous markets, Kroger would lose its largest and most sophisticated competitor, which in time would be subsumed by a new and unproven operator in the Alaskan market.”
“On its face, the proposal appears to violate the FTC’s longstanding merger guidelines regarding market competition and concentration,” they wrote.
The senators pointed out that Kroger chief executive Rodney McMullen told the Senate Judiciary Committee last year that the combined company will invest $500 million to lower prices and $1.3 billion to improve the customer experience.
The Alaska senators said the FTC should make sure those commitments are kept, if the deal is approved.
“While we appreciate the promises made, we are concerned there is no way to enforce Mr. McMullen’s commitment to lowering prices once the merger is approved and it appears to us that such a commitment is only possible because of Kroger’s impending market dominance,” they said. “Perhaps the FTC should require that the pledged price reductions take place as a condition of the merger.”
“Today, Fred Meyer and Safeway/Carrs are the third and fourth largest employers by number of employees in the state of Alaska,” they wrote. “The FTC’s review of this merger must ensure that Alaskan employees and union contracts are protected.”
The senators said Safeway’s takeover of the Alaska-based Carrs chain for $330 million in 1999 provides a cautionary tale showing that requirements must be established to protect employees and union contracts.
At the time, the state of Alaska required that seven stores be sold to a competitor as part of the deal. Alaska Marketplace acquired six of those stores, but they closed in little more than a year. Critics asserted that the state erred by allowing Safeway to sell off lower-performing stores.
“To date, no adequate evidence shows how this proposed merger will ultimately benefit Alaskan consumers,” the senators wrote. “Instead, recent history points to consumer and employee harm, so we ask that the FTC consider enforceable measures to prevent a similar circumstance in Alaska.”
Anchorage Assembly considers weighing in
According to recent data, Fairbanks ranked as the most expensive urban area for groceries and Anchorage as the second most expensive of 274 other urban areas nationwide in a cost of living index review for the second quarter of 2023, released last month by the Council For Community and Economic Research.
The Anchorage Assembly on Tuesday will vote on a resolution that, if approved, would call on the FTC to block the proposed merger because of the increase in food insecurity and market competition issues it could cause.
“The practical reality is, Alaskans have experienced what happens when we consolidate our grocery stores. We get fewer product lines and more expensive groceries,” said Assembly Chair Christopher Constant, who is sponsoring the resolution.
Constant cited negative impacts of the 1999 Safeway deal.
“We started losing stores and we started losing quality products. And now it’s all Safeway-branded products in the store. I mean, there was a huge diversity of products that were available before — (that) doesn’t exist anymore,” Constant said.
The proposed merger means Alaskans would largely depend on a single grocery vendor for the majority of standard groceries, effectively creating a monopoly in the state, he said.
The cost of groceries — already rising — will “very likely go up when there’s only one vendor,” he said.
A Kroger spokesperson on Monday said the merger “will mean lower prices and more choices for more customers in more communities, higher wages and more industry-leading benefits for associates, securing union jobs and expanded opportunities for farmers and suppliers. The only parties who would benefit if this merger is not completed are large, non-unionized competitors such as Walmart and Amazon.”
The spokesperson asserted, “zero stores will close as a result of the merger, all frontline associates will remain employed, all existing collective bargaining agreements will continue, and associates will continue to receive industry-leading benefits alongside bargained-for wages. C&S’s strong operational focus and financial resources will position the divested stores to successfully operate and serve their communities for years to come.”
[Correction: This story has been updated to correct the spelling of FTC chair Lina Khan’s last name.]