By Deborah Bloom

PORTLAND, Oregon (Reuters) – The U.S. Federal Trade Commission (FTC) argued in federal court on Monday that Kroger’s $25 billion merger with rival grocer Albertsons is detrimental to shoppers, highlighting concerns over rising grocery prices.

The FTC and several states took the case to trial in Portland, Oregon, seeking to block the deal, claiming it would lead to higher consumer prices and diminished bargaining power for unionized grocery workers.

FTC Chief Trial Counsel Susan Musser stated during the opening remarks that it would result in Kroger “swallowing” Albertsons, emphasizing that halting the merger would preserve competition, which curbs rising prices and incentivizes quality improvements.

Kroger attorney Matthew Wolf countered that the merger would lower prices at Albertsons, which currently face 10-12% higher prices than Kroger stores. He argued that the FTC’s attempt to block the merger demonstrates ignorance of the industry.

Wolf asserted the merger is essential for competing against giants like Walmart, Costco, and Amazon (which owns Whole Foods). Albertsons’ lawyer Enu Mainigi added that a merger with Kroger provides the best chance for survival against Walmart’s competitive pricing.

She warned of potential layoffs, store closures, and market exits if the merger fails, portraying the deal as a strategic necessity.

This high-profile case aligns with the Biden administration’s objectives to reduce consumer prices amid growing grocery costs and serves as a test for FTC Chair Lina Khan’s antitrust approaches aimed at advancing worker wages.

Wolf stated there is no pay difference between union employees at nearby Kroger and Albertsons locations. Musser countered, explaining that unionized workers leverage strikes to secure better terms, which would weaken due to the merger.

The FTC claims that the merger could harm workers in various labor markets, with unions expressing skepticism about the companies’ competitive promises.

The trial is expected to last around three weeks, addressing grocery industry competition issues. Kroger and Albertsons argue the lawsuit overlooks the broader retail landscape where consumers shop at various outlets beyond traditional supermarkets.

Kroger has stated its intent to sell 579 of the roughly 5,000 stores it would control if the deal is approved. Part of the trial will evaluate the ability of buyer C&S Wholesale Grocers to operate these stores.

Kroger also pledged to cut grocery prices by $1 billion post-merger, utilizing tactics such as improved supplier negotiations and automation investments.

However, Musser noted this investment represents only 0.5% of their combined revenue. U.S. District Judge Adrienne Nelson is contemplating pausing the deal while an FTC judge evaluates competitive impacts, a process that can take years and often results in abandoned deals.

Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming, and D.C. have joined the FTC in suing to block the merger, while Washington and Colorado have also filed separate lawsuits, set to go to trial afterward.