Kroger CEO Rodney McMullen testified in federal court, defending the proposed $24.6 billion merger with Albertsons and asserting that it would lead to lower grocery prices, CBS News reports.
The merger, which would be the largest grocery chain consolidation in US history, is under scrutiny as the Federal Trade Commission (FTC) seeks to block it through a preliminary injunction.
On Wednesday, McMullen argued that the merger would enable Kroger and Albertsons to better compete with retail giants like Walmart and Amazon and would result in reduced prices for consumers.
“The day that we merge is the day that we will begin lowering prices,” McMullen said during his testimony.
He highlighted that Albertsons’ prices are currently 10-12% higher than Kroger’s and asserted that the merger would work to address this disparity.
The FTC has opposed the merger, arguing that it would decrease competition and potentially raise prices amid already high food inflation. The agency’s case includes concerns that combining the two companies could reduce competitive pressure, leading to higher prices and fewer choices for consumers. FTC attorneys pointed out that in the 22 states where Kroger and Albertsons currently compete, the companies often match each other’s prices and services.
In response, McMullen and Kroger representatives countered that the merger would create efficiencies that could be passed on to consumers. They also argued that the deal would allow the combined company to invest more in its stores and improve its services.
Albertsons CEO Vivek Sankaran, who is expected to testify in the ongoing three-week hearing, has previously stated that the merger would not lead to store closures but rather the divestiture of some overlapping locations. Under the proposed deal, Kroger and Albertsons plan to sell 579 stores to C&S Wholesale Grocers, which would assume control of these locations.
The FTC has raised concerns about C&S’s capability to manage these stores effectively. Internal documents and testimonies suggest that C&S executives have expressed doubts about the quality of the stores and the potential need to sell or close some of them.
McMullen and Sankaran’s testimonies, alongside the ongoing legal arguments, will play a crucial role in determining the future of the merger. US District Judge Adrienne Nelson is expected to hear from around 40 witnesses before deciding whether to grant the FTC’s injunction. If the injunction is granted, the FTC plans to proceed with in-house hearings starting October 1.
The merger’s fate will also be influenced by ongoing state-level legal actions, with several states joining the FTC’s lawsuit and others filing separate cases to block the merger.
