A federal judge is hearing arguments over whether the $25 billion merger between Kroger and Albertsons should be allowed to continue. Kroger agreed in 2022 to buy Albertsons, but the Federal Trade Commission sued to block that deal. Some attorney generals, including Arizona’s Kris Mayes, joined that lawsuit – arguing the merger “presents a significant risk of reduced competition and higher food prices nationwide.” Mayes points out the two companies have 250 stores across the state and employ 35,000 Arizonans.
Pete Sepp is president of the National Taxpayers Union, argues the grocery merger should be allowed to go through, and that it would be good for consumers. Sepp joined The Show to talk about how he thinks the deal should be allowed.
Full conversation
MARK BRODIE: A federal judge has been hearing arguments over whether the $25 billion merger between Kroger and Albertsons should be allowed to continue. Kroger agreed in 2022 to buy Albertsons but the Federal trade Commission sued to block that deal. Some attorney generals, including Arizona's Kris Mayes, joined that lawsuit arguing the merger “presents a significant risk of reduced competition and higher food prices nationwide.” Mayes points out the two companies have 250 stores across the state and employ 35,000 Arizonans.
But my next guest argues the grocery merger should be allowed to go through and that it would be good for consumers. Pete Sepp is president of the National taxpayers union. I spoke with him earlier and asked why he thinks the deal should be allowed.
PETE SEPP: In so many cases, the federal government doesn't appreciate the market dynamics whenever it tries to intervene and enforce competition laws. That's especially what's happening here in the grocery market by trying to block the merger between Kroger and Albertsons, which in Arizona of course, is known more colloquially as Fry’s Food and Drug.
The problem is that the government may actually be hindering competition rather than encouraging competition. That's because the market for grocery shopping is no longer what it was, say in the 1980s or 1990s, when customers went to one store to get everything they wanted. Now, they go to shopping clubs or discount outlets, as well as traditional grocery stores to get the best combination of price and choice that suits their preferences. And that means there are numerous types of stores like Walmart, like Target, like Amazon that also provide groceries, in addition to places like Fry’s or Albertsons.
BRODIE: Is that more applicable in some areas than others? Like, I think about rural parts of Arizona, for example, where, you know, you might not be able to get, you know, within an hour, a couple hours, Amazon delivery, you might not have a Costco or, you know, something like that or a Target to, to get your groceries and you might rely on, you know, the Fry’s or the Safeway in your community.
SEPP: Rural areas certainly do have their concerns about access to numerous types of food shopping outlets, but that's being addressed even as we speak in a number of ways. There's more and more access as time goes by, not only to physical outlets but also online outlets. In the end though, Kroger and Albertsons are agreeing to keep a number of stores open, keep a number of jobs on the front line going and committing to reducing prices, not only for suburban and urban but also rural areas as part of their request to merge and the Federal Trade Commission, as well as other antitrust enforcers can, if they wish, invalidate the deal as it goes on, if the companies don't keep their promises.
We also have to remember that if Kroger and Albertsons are not allowed to combine, not allowed to compete on a more efficient basis with the Walmarts of the world, they may very well be in a position of having to close stores that are currently serving rural areas. So again, the government's action here could maybe backfire and cause more trouble, more hardship for rural customers.
BRODIE: What gives you the confidence that, for example, there will be more competition with this merger and, and I guess that prices, as you referenced, will be lower in this new combined entity?
SEPP: Kroger over the past 20 years, for example, has invested upwards of $5 billion companywide to try and reduce prices, and when it has acquired places like Harris Teeter or Roundy's, we have seen prices actually go down. That's because Kroger has a pretty efficient supply chain. That's something that it can bring as a benefit to the combined Kroger-Albertsons company, that Albertsons alone just doesn't have right now.
This is the other thing that's important to remember. Kroger has been an industry leader in food retail, in providing unionized jobs for those who consider unionized labor to be an important component in the retail sector. You can't do much better than what Kroger has done there. And I point out too that many of the competitors in this space are nonunionized, and so that's another factor to consider.
BRODIE: Are there other industries that come to mind that are sort of, and please pardon the pun here because we're talking about groceries, an apples to apples comparison in terms of a proposed merger where, you know, there are some that are concerned about losing competition and raising prices, and you know, as you say, you actually think that there will be more competition and better prices?
SEPP: Well, certainly in the telecommunications space, mergers have allowed competition to more effectively take place, not only in terms of your cell phone service, but also in services like streaming video or providing internet. When we take a look at the way telecommunication services were provided in the 1990s and the 2000s, we thought rather narrowly of our cell phones, but now they're delivering all kinds of internet, they're delivering email, they're delivering many, many different telecommunication services that were not part of the traditional package.
You can also see that even among air carriers, you now have very low cost carriers, ultra low cost carriers and traditional carriers all interacting and competing for certain business, and as the airlines are allowed to pursue more routes and more fare options, passengers are benefiting as a result.
BRODIE: What role do you think public input should play here? And I ask because, for example, an attorney in Arizona, the attorney general has traveled to a number of communities and, and taken input from people and a lot of that has been a lot of concern. People don't seem all that enthusiastic about this merger. I'm wondering in your mind, what role that should play in the ultimate decision by the federal government, whether or not to let this go through?
SEPP: Public input is important in these very large mergers, it should be going both ways though. Not only should competition and regulation, authorities be holding listening sessions where they draw their own conclusions, but the businesses themselves should be given the chance to explain how they see the future going forward and how important it is that they be allowed to combine their strengths and compete with other types of companies.
BRODIE: All right. That is Pete Sepp, president with the National Taxpayers Union. Pete, thanks for the conversation. I appreciate it.
SEPP: Sure, my pleasure. Take care.
