PORTLAND, Ore. (CN) — Before adjourning for the weekend to prepare closing arguments, the Federal Trade Commission brought three expert witnesses to the stand in its rebuttal on Friday in the preliminary injunction hearing to determine whether supermarket chain giants Kroger and Albertsons should be allowed to merge.
According to Aaron Yeater, a financial and economic consultant for the FTC, almost all of the efficiencies Kroger and Albertsons have claimed will result from the merger are neither verifiable nor merger-specific.
Furthermore, Yeater testified Friday that the claimed cost efficiencies would be a fraction of the firm’s combined costs even if achieved.
“Mergers can create many benefits for the firm and for the shareholders,” he said. But those benefits don’t always last, such as a one-time tax benefit.
He also cast doubt on whether the combination of the two companies would lead to lower prices for consumers via stronger negotiation with food suppliers, as CEO for the chains have claimed. Both Kroger and Albertsons negotiate prices with suppliers based on merchandising and promotion, which Yeater said doesn’t automatically mean they would be able to find the lowest price across the board.
“I think it’s important to recognize that the grocery companies, by nature of having limited space, they have to make choices about which products to place in prominent places,” Yeater said.
The FTC argues that a merger would end competitive pricing between the stores, which overlap in 22 states. Part of the deal would also see a “divestment” sale of 579 Kroger and Albertsons stores to C&S Wholesale Grocers, a supplier that owns the Piggly Wiggly and Grand Union store brands.
Yeater pointed to an analysis by economist Nicolas Hill, another expert witness in the hearing, which showed harm to companies by the elimination of competition.
Hill came back to the stand Friday to defend his analysis of the proposed merger and explain how the economist testifying for Kroger and Albertsons drew unreasonable conclusions and presented an inconsistent analysis.
One of those was the notion that Kroger could acquire all the large-format stores in the Portland region and still not have to raise prices. An attorney for Kroger fired back at Hill, questioning the precise area in contention for that statement.
Orley Ashenfelter, a Princeton economist, also took the stand, explaining that one of the defense’s expert witnesses misrepresented the relationship between union and non-union employees.
While Ashenfelter agreed that wages between union and non-union employees at the stores were around the same, the statement ignores other forms of compensation, such as benefits and hours available to work.
“The benefits are substantially different,” Ashenfelter said. Union workers at Albertsons earn higher total pay than non-union workers and work more hours on average, he said.
He also said a merger would harm the labor workforce because workers would only have one company to bargain with.
“A merger would potentially offer opportunity and means for union compensation to decrease,” he said.
A Kroger attorney questioned Ashenfelter’s analysis, particularly that it omitted a deep dive into Kroger. Ashenfelter said he did not have enough time, and the particular answers being requested would require a “serious study.”
Combined, the two chains employ around 710,000 people and own over 5,000 stores.
U.S. District Judge Adrienne Nelson is hearing the antitrust regulator’s effort to block the proposed merger between the two supermarket chains in a Portland federal courthouse.
Nelson’s decision will impact whether the merger can continue without heading to an internal FTC trial, which could take months to complete and stall the planned merger.
In opening arguments, an attorney for Kroger said that the injunction would effectively kill plans for the merger, as a lengthy FTC probe is set to begin Oct. 1.
Closing arguments are set for Tuesday.