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Kroger, Albertsons file pointed responses to FTC

Kroger and Albertsons both filed sharply worded comments this week asserting that the Federal Trade Commission defined the competitive retail and labor markets much too narrowly in its efforts to block the retailers’ planned mergers.

Unlike their statements to the media after the FTC announced in February that it would sue to block the proposed, $24.6 billion merger, the retailers took a much more combative stance and provided detailed objections to the FTC’s specific allegations in their latest filings.

“The Commission’s claims are premised entirely on the Commission’s distortion and willful ignorance of basic but critical facts,” Albertsons said in its comments.

Albertsons says the Commission “entirely ignores” the realities of the competitive grocery landscape. It cited competition from other grocery retailers, including Walmart, Target, Costco, Amazon/Whole Foods, other specialty grocers such as Trader Joe’s and Sprouts, and dollar stores. Albertsons cited Costco in particular as one of the company’s “most fervent competitors.”

Both Albertsons and Kroger also contested the FTC’s assertion that C&S Wholesale Grocers would not be a viable operator for the hundreds of stores that the two companies plan to divest to meet antitrust concerns. The retailers assert that C&S would be well-positioned to operate the stores and that their divestiture plan bears no resemblance to previous failed divestitures that Safeway and Albertsons made to Haggen and Lawrence Bros.

“C&S is not a mom-and-pop operation or a risky private equity venture,” Kroger said in its filing. “It is a well-capitalized company with deep industry experience.”

The retailers also disputed the FTC’s use of “union grocery labor” as a market in which Albertsons and Kroger compete, noting that the case is the first time the FTC has treated labor as a competitive “market” for antitrust purposes.

“This unprecedented product market completely ignores the labor market in which respondents compete, which includes non-union as well as non-grocery retailers,” Albertsons said. “Moreover, the Commission’s allegations regarding the impact of the merger on the union’s bargaining power takes negotiations with the unions out of context and ignores that the merger is actually likely to increase the union’s bargaining power.”

In its filing, Kroger also noted that C&S would be “stepping into the shoes of Albertsons for collective bargaining purposes” in the areas where C&S is acquiring divested union stores and distribution centers.

“Even crediting the Commission’s improper market definition, the number of competitors will not change,” Kroger said.

In the conclusion of its comments, Albertsons said the FTC’s assertion that the merger would harm competition in both the retail grocery and grocery labor markets was based on “so-called ‘facts’” that ignore the realities of the market.

“For this and many other reasons, the Commission’s challenge to the merger should fail on its flimsy merits,” Albertsons said.

The retailers’ filings go on to dispute the FTC’s assertions line by line, often describing the FTC’s use of the terms such as “supermarkets” and “traditional supermarket chains” as being “vague and ambiguous,” and that the FTC took some past statements from the companies out of context.

The comments from both Albertsons and Kroger were made in conjunction with the FTC’s upcoming in-house review of the planned merger, to be overseen by an administrative law judge in Washington, DC As previously reported, the FTC’s request for a preliminary injunction to block the merger will be heard in US District Court in Portland, Ore., beginning on Aug. 26.