DENVER — A Colorado court battle that could have major implications for consumers nationwide began Monday.
The Colorado Attorney General's Office began its case against the proposed multi-billion dollar merger between Kroger and Albertson's grocery store chains.
According to the AG's Office, the two companies already account for more than half of all grocery sales in the state.
If the merger is approved, the companies say that combined, they would have just under 5,000 stores, around 4,000 pharmacies, and more than 710,000 associates.
"The merger will eliminate head-to-head competition that benefits consumers. Kroger and Albertsons are intense rivals throughout the state," said an attorney with the AG's Office.
The AG's Office has long argued that competition keeps both companies working to find the best products, prices, and customer experiences for consumers.
To prove the merger would end competition, the AG's Office argues that a judge should consider what similar grocery stores would be available to consumers in addition to the merged Kroger/Albertsons stores.
The AG's Office argues that only specific, close substitutes should be considered competition, not specialty or club stores like Trader Joe's, Whole Foods, or Costco.
"The law and the economic principles are clear. Mere cross-shopping is not enough. The law requires the court to narrow the market to only close substitutes," the AG's Office said in court.
Attorneys for Kroger and Albertsons disputed that argument and claimed consumers have many options.
"Despite the fact that they call themselves a grocery store, Trader Joe's doesn't count. We can't look at them when deciding what the effects are on competition," rebutted an attorney for Kroger, "That's the centerpiece of the state's case. Costco is the number two grocery seller in the entire country. Number two behind only WalMart. We can't look at that."
The two grocery chains said the merger is the only way to give traditional grocery stores a fighting chance against growing competition from grocery services from Amazon and Walmart.
How would a combined Kroger-Albertsons impact shoppers?
According to Jack Buffington from the University of Denver, the potential merger could lead to higher prices in Colorado due to reduced competition.
“King Soopers and Walmart are the two largest grocery stores in Colorado, and Safeway is third. So, if this merger comes about, you would have another grocery chain that would be as large as Walmart, and the two of those combined would be over 50% of the entire grocery market,” Buffington said.
Buffington said that would create a highly concentrated market that could make some products more expensive.
“I think from a price standpoint, there could be some higher prices because there's less competition. Some products could be higher prices, some prices could be lower, but in general, less competition often reduces the ability of companies to compete on price,” he said.
Buffington added that the merger could also lead to closures after the proposed 91 Colorado Safeway and Albertsons stores are sold or transferred under a divesture plan.
“Maybe there would be less options for stores, so consumers may have to go farther to get their groceries than they have in the past,” he said.
Buffington suggests that consumers should explore other shopping options and be more conscious of where they buy their groceries.
“People just go through their routines and always go to the same place. So, I think when something like this happens, they just have to be more conscious of all the places where they could buy their groceries, to shop for prices or quality or variety.”
He also notes that Attorney General Phil Wieser’s attempt to block the merger might face challenges at the national level.
“The problem, from a Federal Trade Commission (FTC) standpoint, from a national standpoint, is it's one of 50 states. And so how do you know if some ruling that happens at a state level impacts something that's really a national merger?” Buffington explained.
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