Day 2 of the Courts Review of the FTC v Kroger Merger

We have already posted on Grocery Stores artificially holding prices high and the use of another entity gathering those prices and supplying them to various entities. In day two, Kroger’s use of Albertson’s higher pricing to set their own pricing is a ” strategic avoidance of lowering pricing.” Read on, I will gather up Day Three for later tomorrow.

Kroger’s Pricing Strategies and Market Control Scrutinized in Day 2 of Merger Hearing, Economic Liberties

Portland, OR — After the second day of the Federal Trade Commission v. Kroger-Albertsons hearing in the U.S. District Court for the District of Oregon, the American Economic Liberties Project released the following summary—from Research Manager Laurel Kilgour, reporting from Portland—of the key arguments made and points discussed.

• Kroger’s Strategic Price Hikes: Testimony from Andrew Groff, Director of Retail Insight & Strategy at Kroger, revealed that Kroger deliberately raised prices on essential goods like milk and eggs more than necessary during inflationary periods, directly benefiting from the increased margins at the expense of consumers. Groff claimed that price hikes in areas with no or low competition from traditional supermarkets like Albertsons were needed to offset labor and transportation costs– but Kroger was regularly spending money on stock buybacks.

• Head to Head Competition with Albertsons: Despite Kroger’s argument that the merger is necessary to compete with Walmart, evidence showed that Kroger primarily focuses on matching prices with Albertsons rather than competing aggressively with Walmart. This contradicts their narrative of needing the merger to challenge Walmart’s dominance.

• Strategic Price Ceilings: Kroger’s use of Albertsons as a “price ceiling” indicates a strategic avoidance of lowering prices in markets where they compete directly, suggesting that the merger could lead to even less price competition.

• Undermining Consumer Narrative: Internal communications and court testimony revealed that Kroger’s approach to pricing was more about maintaining high margins than offering competitive prices, which casts doubt on claims that the merger would lower prices for consumers. Michael Marx, President of Roundy’s Division (part of Kroger) confirmed internal documents showing that stores with a Mariano’s banner kept egg prices high even when their own costs went down and even after Walmart lowered prices, only lowering them weeks later once Jewel Osco (owned by Albertsons) cut prices.

• Market Concentration Worries: The FTC emphasized the significant market share Kroger and Albertsons hold in many regions. While Kroger continues to attempt to keep the focus on national competition, the Commission emphasized that merger would further concentrate power in these smaller and mid-size markets, reducing competition and likely leading to higher prices for consumers.

• Labor Market Implications: The hearing also highlighted concerns about the potential impact on the labor market. Albertsons executive Carl Huntington, who oversaw stores in Portland, Oregon, confirmed that strikes at traditional supermarket competitors like Kroger can lead to a “massive” sales influx.

• Both Kroger and Albertsons have unionized workforces, and the merger could weaken unions’ leverage—especially in markets where Kroger and Albertsons dominate—leading to worse conditions for workers.

Day 1 of the Courts Review of the FTC v Kroger, Angry Bear by Economic Liberties