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albertsons
Kroger Posts Massive Profits Amid Price Gouging Outcry and Merger Push
Kroger executives have "proven they'll take advantage of their customers to bolster their profits," said watchdog Accountable.US.
Sep 12, 2024
Grocery giant Kroger's practice of price gouging in order to pass on its "inflation to consumers," as one executive recently said, has paid off for the $37 billion company, according to its quarterly earnings posted on Thursday.
The company, which is facing a legal challenge from the Federal Trade Commission (FTC) over its proposed acquisition of rival store Albertsons, reported that it earned $466 million in the second quarter of 2024, with year-to-date earnings of $1.4 billion—nearly double the amount it earned last year.
The government watchdog Accountable.US accused Kroger of profiting off "rising costs" for families across the United States—ones that are caused not by inflation but by "greedflation": the practice of purposely keeping prices high to increase profits, even though higher labor costs and supply chain woes from the coronavirus pandemic era have subsided.
"Should consumers pay the price for corporate greed?" said the group.
The Biden administration is working to block Kroger's proposed merger with Albertsons, which the FTC says would result in "a straight-up monopoly" in some communities where Albertsons stores would likely close.
The FTC has raised concerns both about how the merger would raise prices at stores whose owners already engage in price gouging and would no longer have to compete with Albertsons, and about likely job losses for many employees. In two counties in Southern California, for example, 115 out of 159 Albertsons stores are located within two miles of a Kroger, raising concerns among unionized workers that their stores could be seen as "redundant" after the potential merger.
"Corporate price gouging has cost consumers enough, yet Kroger wants to make matters worse by cornering the market to maximize profits."
Accountable.US said Thursday that the merger could cost $334 million in wages for nearly 1 million grocery workers.
"The Biden-Harris administration is putting American families first by challenging the ill-advised merger between Kroger and Albertsons," said Liz Zelick, director of the group's Economic Security and Corporate Power Program. "Corporate price gouging has cost consumers enough, yet Kroger wants to make matters worse by cornering the market to maximize profits. Make no mistake: If the merger goes through, it will leave many families worse off with higher prices and fewer store locations."
Late last month, Kroger's senior director of pricing, Andy Groff, told an FTC attorney during questioning that the grocery chain had raised the prices of milk and eggs above the rate of inflation.
The company has also used "dynamic pricing" in some of its stores for years—changing prices throughout the day—and has partnered with an artificial intelligence company to develop software that could tailor the cost of products to individual shoppers by collecting their personal data.
While reporting a massive financial windfall, said Accountable, Kroger executives have "proven they'll take advantage of their customers to bolster their profits."
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'Corporate Greed at Its Absolute Worst': FTC Challenges Kroger Merger
"As grocery store 'price gouging' reaches the top of the political ticket, the FTC is intervening to protect consumers and workers from further harm."
Aug 26, 2024
As grocery giants Kroger and Albertsons faced the U.S. Federal Trade Commission in a federal court Monday, economic justice advocates said Americans should be wary of the corporate media's reporting on the FTC's lawsuit, which aims to block the companies' proposed $24.6 billion merger.
"Get ready for more takes like these from corporate media," said the American Economic Liberties Project (AELP), posting on social media a clip from CNBC in which anchor Joe Kernen echoed Kroger and Albertsons' claims that the merger would help them compete with big box stores like Walmart, lower prices for consumers, and benefit workers.
"With a merger this blatantly harmful to consumers, workers, and countless local communities, Wall Street cheerleaders can't help but rely on misleading arguments," said AELP.
The trial, kicking off in a U.S. District Court in Portland, Oregon, centers on a claim by the FTC along with eight states and the District of Colombia that the merger would reduce industry competition—creating "a straight-up monopoly" in small communities like Gunnison, Colorado where 6,000 residents "would have to drive 65 miles to reach a non-Kroger supermarket," according to AELP.
FTC Chair Lina Khan is also opposing the merger because it would weaken unionized workers' bargaining power, particularly in parts of the country where dozens of Kroger and Albertsons stores are located near each other.
With 115 of 159 Albertsons stores located within two miles of a Kroger in Los Angeles County and Orange County, California, the United Food and Commercial Workers International Union (UFCW) has warned that hundreds of unionized workers could see their stores close if the merger is finalized.
As the trial began Monday, The New York Times published an interview with an employee of an Albertsons subsidiary in Woodland Hills, California. Leonard De Monte was represented by the UFCW in 2015 when the grocery store he was working at was sold as part of Albertsons' merger with the store's parent company—a deal that was called "an unmitigated disaster" for workers by AELP senior legal counsel Lee Hepner.
De Monte found another job at the Albertsons subsidiary, but was demoted to minimum wage. Now nine years later, after working his way up to a $27-per-hour union wage, the store De Monte works at is once again at risk of being sold if the merger goes through, and he fears being demoted to minimum wage again and losing his benefits.
"I have great health benefits because I've been with the company so long," he told the Times. "If I lose my health benefits, I would have to pay out of pocket."
Despite the stores' claim that they need to compete with Walmart and Amazon, AELP pointed out in March that Kroger and Albertsons acknowledge one another as their top competition. Without the two stores competing, said the group, "grocery workers will lose bargaining power, both because individually they won't have a competing employer to go work for, and because unions will lose leverage during contract negotiations. As a result, workers will potentially face lower wages, worse working conditions, and layoffs."
According to an analysis by the Economic Policy Institute, the merger would reduce the total annual earnings of grocery store workers in affected metropolitan areas by $334 million.
In court on Monday, the FTC displayed text messages showing that Kroger executives have complained that Albertsons has forced it "to accept more worker compensation."
The progressive think tank Roosevelt Institute said the trial, which is expected to go on for three weeks, shows that Khan and the FTC are "taking the harms of corporate consolidation on workers seriously."
Kroger's arguments and business practices—including using "dynamic pricing" to price gouge and its exorbitant CEO pay—represent "corporate greed at its absolute worst," said former U.S. Labor Secretary Robert Reich.
"The Kroger-Albertsons merger would eliminate head-to-head competition between grocery stores across the country," said Hepner. "As grocery store 'price gouging' reaches the top of the political ticket, the FTC is intervening to protect consumers and workers from further harm."
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FTC and State AGs Sue to Block Kroger-Albertsons 'Mega Merger'
"By suing to block the Kroger-Albertsons merger, the FTC is keeping grocery bills down and workers in their jobs," said one anti-monopoly campaigner.
Feb 26, 2024
The Federal Trade Commission and a bipartisan group of state attorneys general joined forces Monday on a lawsuit aimed at blocking the supermarket giant Kroger from buying up the Albertsons grocery chain, warning the merger would hamper competition, further drive up food prices, and harm workers.
If completed, the $24.6 billion deal would mark the largest supermarket merger in U.S. history at a time when grocery chains are facing growing scrutiny for driving up prices to pad their bottom lines. A Kroger-Albertsons grocery behemoth would control more than 5,000 stores and 4,000 retail pharmacies across the country, according to the FTC.
"This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years," said Henry Liu, director of the FTC's Bureau of Competition. "Kroger's acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today."
"Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating," Liu added.
The attorneys general of Arizona, California, Washington, D.C., Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming are joining the FTC's suit, which was filed in the U.S. District Court for the District of Oregon.
The lawsuit drew immediate praise from progressive advocacy groups and opponents of food industry consolidation.
Stacy Mitchell, co-executive director at the Institute for Local Self-Reliance (ILSR), said the decision to sue shows that the FTC "sees what we have long argued—there was no upside to this merger for anybody other than the top executives at these two companies and their investors."
ILSR has estimated that if the deal survives legal challenges, Kroger-Albertsons and Walmart—the largest low-wage employer in the U.S.—would control 70% of the grocery market in over 160 cities.
"Concentration in grocery retail has already caused food prices to skyrocket," said Mitchell. "We know from past grocery mergers that this one would have sent prices for consumers even higher. It would have left many communities, especially on the West Coast, with little to no competition or choice about where to shop. And it would have hurt retail workers by giving the combined companies even more leverage to push down wages and dictate terms."
Grocery prices have outpaced overall inflation in the U.S. over the past four years, surging by roughly 25%—and they remain stubbornly high even as inflation has fallen substantially from its peak of 9.1% in the summer of 2022.
The FTC, which has been assessing the proposed merger for more than a year, said Monday that because Kroger and Albertsons are direct competitors, a merger of the two "would eliminate head-to-head price and quality competition, which have driven both supermarkets to lower their prices and improve their product and service offerings."
"If the merger takes place, grocery prices will increase, and Kroger and Albertsons' incentive to improve product quality and customer service will decrease, further harming customers," the agency said.
The deal would also bring economic pain for workers, according to merger opponents. The Economic Policy Institute (EPI) has estimated that if the acquisition is completed, roughly 746,000 grocery store workers in over 50 metropolitan areas of the U.S. would see their annual earnings fall by a combined $334 million.
"Workers' ability to negotiate better pay and working conditions rests on their capacity to switch jobs," EPI senior economist Ben Zipperer explained in a 2023 memo. "By decreasing the number of outside options available to workers, the merger will limit competition for hiring and retaining employees, and grocery store worker earnings will fall as a result."
The FTC said Monday that executives at both Kroger and Albertsons have admitted that the proposed merger is anticompetitive. The agency quotes one unnamed executive as saying, "You are basically creating a monopoly in grocery with the merger."
Morgan Harper, director of policy and advocacy at the American Economic Liberties Project, said in a statement that "by suing to block the Kroger-Albertsons merger, the FTC is keeping grocery bills down and workers in their jobs."
"From higher prices for consumers, worse wages and benefits for workers, a tighter squeeze on producers and farmers, to an increased risk of grocery and pharmacy deserts across the 48 states this merger affects, the harms of this deal were clear from the start," said Harper. "No divestiture or concession would make it work—which is why over 100,000 workers and countless advocates have spoken out against this disastrous merger."
"Kroger and Albertsons would be wise to save everyone's time and abandon this deal," she added.
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