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FTC and US states argue merger will harm competition and

raise

prices

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Kroger ( KR ) and Albertsons ( ACI ) claim merger needed to compete with

Walmart ( WMT ), Amazon ( AMZN )

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Kroger ( KR ) pledges $1 billion in price cuts, plans to sell 579

stores if deal proceeds

By Jody Godoy, Deborah Bloom

PORTLAND, Oregon, Aug 26 (Reuters) - The U.S. Federal

Trade Commission kicked off a trial on Monday in its bid to

block Kroger's ( KR ) $25 billion merger with Albertsons ( ACI )

, telling a federal judge in Portland, Oregon, that the

deal would eliminate competition between the top grocery store

chains and hit consumers' wallets.

The FTC and several states sued to block the deal in February,

saying the merger would mean higher prices for consumers and

less bargaining power for unionized grocery workers.

FTC Chief Trial Counsel Susan Musser urged U.S. District

Judge Adrienne Nelson on Monday to pause the deal, saying in

opening statements that it would result in Kroger ( KR ) "swallowing"

Albertsons ( ACI ).

"Stopping this multibillion-dollar deal will keep in place

the vigorous competition that acts as a check on rising grocery

prices and spurs improvements in quality and innovation,"

she said.

Nelson is considering whether to pause the deal while an FTC

in-house judge examines how it would impact competition.

Such reviews can take years, and companies often abandon

paused deals rather than complete the process.

Kroger ( KR ) and Albertsons ( ACI ) are also expected to deliver their own

opening statement on Monday.

Kroger ( KR ) and Albertsons ( ACI ) are asking the judge to let the deal

proceed, saying the tie-up is necessary to compete with

multinational corporations like Walmart ( WMT ), the largest

grocery retailer in the U.S., bulk shopping mainstay Costco

and Amazon.com ( AMZN ), which owns Whole Foods.

Kim Cordova, president of a United Food and Commercial

Workers International Union local in Colorado and Wyoming,

expressed skepticism about that argument at a press conference

outside the courthouse.

"We don't believe the company's promise that they are doing

this for competition," she said.

The case is a high-profile piece of the Biden administration's

push to lower prices for consumers, and comes as high grocery

bills take prominence in the U.S. presidential race between Vice

President Kamala Harris, the Democratic candidate, and former

President Donald Trump, her Republican opponent.

It is also a key test of FTC Chair Lina Khan's initiative to use

antitrust law to boost wages and mobility for workers.

The trial is expected to last around three weeks and feature

evidence about how major grocery retailers and smaller rivals

set prices and view competition in the industry.

Kroger ( KR ) and Albertsons ( ACI ) say the lawsuit's focus on traditional

supermarkets ignores that consumers typically shop for food at a

variety of locations including big-box stores like Target ( TGT )

and dollar stores such as Dollar Tree ( DLTR ).

Kroger ( KR ) has said it will sell 579 of the approximately 5,000

stores it would own if the deal is allowed to go through. Part

of the trial will focus on whether buyer C&S Wholesale Grocers

can successfully run them.

Kroger ( KR ) has also pledged to lower grocery prices by $1 billion

after the merger.

Retailers use multiple levers to lower prices, including

negotiating better deals with suppliers, investing in automation

in the supply chain or changing the way they label and package

products.

Although Kroger ( KR ) said it could not provide more specifics on

the details of the price investments, a source familiar with the

matter indicated that the reductions will likely focus on

essential and high-demand items first.

"It's not going to be peanut butter spread, for instance,

initially, but targeted on across a wide range of staples," the

source said.

Arizona, California, Illinois, Maryland, Nevada, New Mexico,

Oregon, Wyoming and the District of Columbia are pursuing the

case alongside the FTC.

Washington and Colorado have filed their own lawsuits to

block the merger. The lawsuits are scheduled to go to trial

after the Oregon case.

The states all have Kroger ( KR ) and Albertsons ( ACI ) locations.