On Jan. 17, the Washington state Supreme Court rejected a lawsuit filed by Attorney General Bob Ferguson to block a $4 billion dividend payment by the supermarket corporation Albertsons to shareholders. The state sued the company in late October when it was announced that the Kroger company would acquire Albertsons in a proposed $24.6 billion merger agreement, which had been negotiated and agreed upon by both parties.
Ferguson argued that the dividend payment would damage the company and make it uncompetitive while regulators scrutinized the merger. In a statement, Albertsons said that the dividend would be paid out to shareholders on Jan. 20.
Federal regulators have yet to rule on the legality of the merger between the two supermarket giants. Under antitrust law, monopolistic practices such as mergers that harm competition can be deemed illegal. If necessary, the Federal Trade Commission and Department of Justice could sue or otherwise intervene to prevent the merger from going through.
According to their websites, Albertsons owns more than 2,200 grocery stores and supermarkets, while Kroger owns more than 2,700. In the third quarter of 2022, the companies made $18.2 billion and $34.2 billion in sales, respectively. According to Bloomberg, if the merger goes through, the combined megacorporation would own 16 percent of the United States’ grocery store market share, behind only Walmart, which owns 21 percent.
In Seattle and the unincorporated parts of King County directly to the south of the city (White Center, South Park and Skyway), about 32 stores would be affected. These include the Safeway, QFC and Fred Meyers brands. This is approximately 29 percent of all the grocery stores and supermarkets in the city.
Consumer advocacy groups and labor unions have come out in opposition to this merger. In a video from the labor media group More Perfect Union, former Whole Foods Vice President Errol Schweizer argued that the new company would use its market share to further raise grocery prices.
“In a healthy market, when business costs go down, consumers pay lower prices. But that is not the case in a consolidated market,” Schweizer said. “Research shows when there is less competition, price savings get turned into corporate profits.”
One of the local unions fighting the merger is UFCW 3000, which represents grocery store workers in the Seattle area. In November, local president Faye Guenther traveled to Washington, D.C., to denounce the merger alongside other unions ahead of a Senate subcommittee hearing.
Tom Geiger, a special projects director and spokesperson with UFCW 3000, said that the Albertsons dividend would only benefit a handful of ultra-wealthy investors.
“The amount is pretty massive. It’s hard for most of us to imagine $4 billion,” he said.
Geiger added that Albertsons is taking out loans to pay for this bonus, potentially sabotaging the company even if regulators decide that a merger is illegal.
“Roughly half of that dividend they were going to be [paying] with cash, but a huge chunk of that dividend they are going to be paying through taking on more debt — they’re literally going to go out and borrow money to issue a dividend,” Geiger said.
If the merger does go through, Geiger said that the new megacorporation could close or sell off stores that are close to each other.
“The fear is that would lead to many stores being closed, it would lead to reduced competition, reduced choices for customers, higher prices,” he said.
According to the U.S. Department of Agriculture, supermarket prices have risen by 12 percent between November 2021 and November 2022; restaurant prices rose by 8.5 percent over that same time period. Some analysts have argued that this discrepancy is due to the fact that there is far more competition in the restaurant industry than in the supermarket industry.
Geiger said that, while grocery store companies were raking in profits from the inflation crisis, they could have invested in their workers instead of handing over money to shareholders.
“If you have $4 billion, it’s really an insult to the customers and workers — giving all that money away instead of making that investment in the workers, reducing prices and improving safety,” he said. “Once that money’s gone, it’s gone.”
Guy Oron is the staff reporter for Real Change. Find them on Twitter, @GuyOron.
Read more of the Jan. 25-31, 2023 issue.