Kroger and Albertsons executives defend proposed merger at hearing

The battle over whether grocery giants Kroger and Albertsons should be allowed to combine is heating up.

On Tuesday, leaders of the two companies defended their proposed merger at a congressional hearing in Washington, where they faced a series of questions about how the deal could shake up the competitive landscape — and potentially the prices that consumers pay at the store.

“I just don’t see less competition going forward,” Kroger CEO Rodney McMullen said at the hearing by the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights. “It’s easy for customers to make a right turn or a left turn.”

Kroger announced plans in October to acquire Albertsons in a deal valued at $24.6 billion. The Cincinnati-based company is the second-largest grocer by market share in the United States, behind Walmart, and Albertsons is fourth, after Costco, according to market researcher Numerator. Together, Kroger and Albertsons would be a closer second to Walmart.

At the hearing Tuesday, McMullen said that the combined company could help lower food prices and improve the customer experience, especially at a time when grocers are racing to adapt to changes like online shopping. He said retailers have to keep reinventing themselves to stay relevant and convince customers to drive to their stores.

Yet the proposed merger has faced intense pushback from elected officials of both political parties and opposition from the United Food and Commercial Workers, a major grocery union that represents thousands of the grocers’ employees.

Sen. Amy Klobuchar, a Democrat from Minnesota, led the hearing Tuesday along with Sen. Mike Lee, a Republican from Utah. Both challenged the companies on their actions, including Kroger’s $1 billion in share buybacks announced last year and plans to pay dividends to shareholders as well as previous deals, such as Albertsons’ acquisition of Safeway.

They emphasized that the proposed deal comes at a time when groceries are taking up more of American families’ budgets. Food prices have surged as inflation hovers near four-decade highs. Prices of everyday items, including butter, eggs, poultry and milk have jumped by double-digits from the year-ago period as of October, according to the most recent federal data available.

The hearing offers a preview of the bigger antitrust battle ahead.

For Kroger and Albertsons, the argument is clear: combining will help them weather dramatic industry changes. Online grocery sales are eating into already thin margins. New players, such as deep discounters like Aldi and e-commerce players like Amazon, are also pressuring traditional grocers.

“The marketplace for groceries over the past decade has completely transformed making the competition for consumers fierce,” said Albertsons CEO Vivek Sankaran said at the hearing. “The best way to compete with mega stores…