Labor takes spotlight in Kroger-Albertsons merger hearing as Oregon Fred Meyer workers begin strike

A top Kroger labor relations manager and the leader of striking Oregon grocery workers testified Wednesday in a federal court hearing over the grocery chain’s proposed merger with rival Albertsons.

The labor leader — whose union had previously endorsed the merger, only to withdraw its support as its rapport with the company soured amid contract talks — argued it would undermine unions ability to bargain, while the Kroger official said unions would remain formidable even if the merger were approved.

It’s an argument that will be closely examined by U.S. District Judge Adrienne Nelson, whose decision on whether to place a temporary block on the merger is likely to determine whether it moves forward at all.

Regulators from the Federal Trade Commission have made labor a pillar of their argument, saying allowing Kroger, parent of Fred Meyer and QFC, and Albertsons, which owns Safeway, to combine would create a monopoly on union grocery workers and undermine their leverage at the bargaining table.

It’s a novel and largely untested argument. Antitrust regulators have historically based their arguments for blocking larger mergers and acquisitions on the potential impact to consumers, though the workforce impacts are also considered in key anti-monopoly laws.

[Kroger hiked milk, egg prices above inflation, merger judge is told]

The strike mounted by 4,500 Fred Meyer grocery workers affiliated with the UFCW Local 555 added some drama to the proceedings as members walked picket lines outside Fred Meyer stores.

It’s unclear whether the labor unrest will affect the judge’s decision — experts say union endorsements or denunciations, for example, rarely sway antitrust rulings.

But lawyers for the Federal Trade Commission put plenty of questions about its endorsement and the strike to Dan Clay, president of the United Food and Commercial Workers Local 555, which represents workers in the grocery and other industries in parts of Oregon, Idaho and southwest Washington state.

The union, which also represents workers at Albertsons stores, originally said it believed Kroger would be a preferable buyer to any viable alternatives.

Clay testified the union pulled its support for the merger after new information came to light during contract negotiations that led the union to question Kroger’s claims about investing in its workers.

He said the union asked for significant wage increases and contributions to its pension plan. He said that Kroger’s negotiators told the union that its wage proposals “could lead to store closures in the Portland area.”

He also said that Kroger’s bargaining team told the union that money to increase worker wages wouldn’t be available unless a merger with Albertsons were approved.

He added Kroger planned to keep nonunion stores in Alaska and sell off union stores to C&S Wholesale Grocers as part of a divestiture plan to satisfy anti-competitive concerns. C&S, he said, would pick up those stores’ pension liability.

He said those conditions would put C&S at a “competitive disadvantage” against the combined Kroger and Albertsons.

Questioned by an attorney for Kroger, Clay testified that the union’s opposition to the merger “is not a reflection” of its opinion of C&S as a potential operator. The chain has agreed to maintain the union workforce in the unionized stores it acquired from the merger.

Jon McPherson, Kroger’s vice president of associate and labor relations, testified that Kroger is one of the largest unionized grocery workforces in the U.S. — though not all its stores are unionized — and that most union workers are represented by the United Food and Commercial Workers.

He also testified that a combined Kroger and Albertsons result in more members and therefore more leverage.

His testimony, though, suggested Fred Meyer and Kroger negotiators remain far apart in their contract talks.

Under questioning by regulators, McPherson testified the main disagreement is over wages. He said the wage increases that the union wants for its new contract are “astronomical.”

McPherson said Kroger “put a better offer on the table” than in its last contract talks with UFCW Local 555, which resulted in a brief December 2021 strike.

Kroger, McPhereson said under questioning, came close to proposing a “mutual strike assurance agreement” with Albertsons during that strike. The agreement would have locked out workers at both chains until the labor dispute was resolved.

Instead, Fred Meyer and the union reached a settlement, bringing the walkout to an early end after one day.

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Kristine de Leon covers the retail industry, small business and data enterprise stories.