As Acme parent company defends $24.6 billion merger in court, Temple researcher challenges anti-trust concerns

PHILADELPHIA (KYW Newsradio) — There could be some changes in store for your local Acme unless the government successfully stops the biggest supermarket merger in U.S. history.

The Federal Trade Commission is trying to block the proposed $24.6 billion merger of grocery chains Kroger and Albertsons, Acme's parent company, saying it would reduce competition, leading to higher prices, lower quality and diminished wages and benefits for workers — but Subodha Kumar, a researcher and professor with Temple University’s Fox School of Business, says the government's lawsuit is blowing the merger out of proportion.

"I think that some of the issues raised by the FTC might be an overstatement and not looking at all the aspects even though some of the points are valid,” Kumar said. "I don't think they can just arbitrarily increase prices just because they merged."

Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states. Albertsons, based in Boise, Idaho, operates 2,273 stores in 34 states. They say combining their brands would hold down prices by giving them more leverage with suppliers and allowing them to compete with big rivals like Walmart and Costco.

"Even if these two companies merge, they would not be bigger than Walmart," Kumar said.

Walmart is the largest food store in the country, by a longshot, controlling around 22% of U.S. grocery sales. Kroger and Albertsons, combined, would control around 13%.

Kumar says Walmart, Amazon and others would prevent Kroger from raising prices on groceries, "because other stores are there. They are not gone and they are quite competitive, actually."

In addition, Kumar says, the lawsuit ignores possible benefits to the consumer.

"They're likely to get fresher food, because they will have better supply chain — or even lower prices on that. That will simply be the artifact of streamlined supply chains and better data."

Together, the companies employ around 710,000 people. The FTC argues the merger undermines labor unions but Kroger and Albertsons say all collective bargaining agreements would be honored.

The two companies are defending the proposed merger in federal district court in Portland, Oregon, this week. The hearing is expected to last until Sept. 13. If the judge decides to grant the FTC’s request for a preliminary injunction, the merger would be delayed while the commission conducts an in-house case against the deal before an administrative law judge.

If the merger is approved, both Kroger and Albertsons say no stores would be closed. They have agreed to sell 579 of them, in locations where their stores would overlap, to C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets.

Washington and Colorado have the most stores that would be divested. Separate lawsuits brought by both states are expected to begin in September.

The Associated Press contributed to this report.