CINCINNATI — When Kroger employees went on strike in Denver two years ago, union leaders suspected the company had a secret side deal with the Albertsons grocery chain not to hire striking workers. But they didn’t have evidence of the so-called “no poach” agreement until Colorado’s attorney general included an email between the companies in a court filing last month.
Kroger denies that the 2022 email is evidence of a no-poach agreement, which are illegal arrangements in which companies agree not to hire each other’s employees. But Colorado Attorney General Phil Weiser described the arrangement as a “naked restraint of trade” in a Feb. 14 complaint that seeks a $1 million penalty against both companies.
The email was written three days before a 10-day strike began at 78 King Soopers locations that Kroger owns in the Denver area. An Albertsons executive told his Kroger counterpart “we don’t intend to hire any King Soupers (sic) employees” and “we don’t intend to solicit” Kroger employees to transfer prescriptions to Safeway.
“They weren’t just colluding to break a strike. They were colluding to not market pharmacy products to each others’ customers,” said John Marshall, a California-based capital strategies director for the United Food & Commercial Workers Union. “They weren’t just targeting workers. They were targeting consumers as well.”
That’s why Marshall thinks the email could help the Federal Trade Commission block Kroger’s $25 billion acquisition of Albertsons.
“I’m not familiar with another case where a no-poaching agreement has been cited as a reason for a regulatory agency to block a merger like this,” Marshall said. “Here we have two companies that essentially dominate the unionized food-retail labor markets in dozens of markets across the United States and the impact of moving from two employers to just one employer in that market would be a huge increase in power and would give Kroger the ability to suppress wages and benefits dramatically.”
Kroger declined to be interviewed for this story. But CEO Rodney McMullen broadly addressed the topic in last week’s earnings call with Wall Street analysts.
“The character of a company is clear in its actions regardless of what others claim,” McMullen said. “We know this merger will result in a secure future for union jobs. Kroger has added more than 100,000 union jobs in a national retail environment where these union jobs shrank elsewhere. We are making historic investments in wages, including $2.4 billion in incremental investments since 2018 on top of hundreds of millions of dollars in benefit investments.”
Pivotal hearing set for Aug. 26
The Kroger-Albertsons merger has been controversial from the start, with Kroger defending the deal as necessary to compete against Walmart, Amazon and dozens of smaller rivals. But critics, including the UFCW, argue the company will use its increased market clout to raise prices, bully suppliers and suppress wages.
The FTC spent more than a year investigating the matter. Kroger and Albertsons offered to sell more than 400 stores in cities where the two companies have the most locations. But in the end, two states filed individual complaints against the deal and the FTC challenged the deal with an administrative complaint and federal lawsuit.
In the most important case, a federal judge in Portland has scheduled an Aug. 26 hearing to determine whether to issue a preliminary injunction against the merger. The two-week hearing is expected to cover several topics, including whether the merger will lead to higher prices and lower wages.
“By eliminating the current competition for union grocery labor between Kroger and Albertsons, the proposed acquisition would prevent the unions from being able to play them off each other during collective bargaining negotiations, substantially increasing Kroger’s negotiating leverage,” said the FTC complaint.
The case is noteworthy because it combines two regulatory trends in a way that hasn’t been seen before, according to a March 6 blog post by the Brownstein law firm in Denver.
“First, antitrust authorities are now looking beyond consumer harm in merger investigations and are actively considering the impact of the transaction on labor and labor markets,” said the post. “Second, during a merger investigation, the antitrust agencies may discover prior anticompetitive conduct that they may decide to go after,” including no-poach agreements.
“The Federal Trade Commission is going off the rails,” said Ohio Rep. Bill Seitz, a Green Township Republican who has worked as an antitrust lawyer for more than 40 years. “They have this theory, which has never been tested anywhere, that the merger should be stopped because it reduces the bargaining power of the union workers. And I think that won’t fly.”
Seitz is not involved in the Kroger-Albertsons case, but he objects to the FTC’s labor arguments as an illogical overreach of federal regulatory power.
“Normally, we enjoin those mergers that are going to raise price to consumers,” he said. “If you depress wages paid to union workers, assuming that’s even what they would do, who benefits from that? Consumers!”
Marshall argues consumers will be harmed if the merger leads to weaker union contracts, fewer employees in stores and less competition between similar operators like Kroger and Albertsons.
“In this case, the interest of consumers and workers is 100% aligned, because if Kroger is allowed to acquire Albertsons, they’ll have so much power in the marketplace, they can lower wages for workers and raise prices for consumers without passing along any of the cost savings to those consumers,” Marshall said.
