The FTC is trying to stop a mega-supermarket merger. Here’s why.
The Federal Trade Commission had filed a lawsuit to prevent the merger between Kroger and Albertsons because it would allegedly create a monopoly in the supermarket industry.
U.S. Senators Elizabeth Warren (D-Massachusetts) and Bob Casey (D-Pennsylvania) announced Wednesday that they would investigate Kroger’s use of electronic price tags on shelves to determine whether they constitute price gouging.
The so-called “electronic shelf label” technology was introduced by Kroger and other grocers over the past decade to save on the labor costs of changing paper price labels on shelves. In a letter Monday to Kroger CEO Rodney McMullen, the senators expressed concern that the technology could be exploited to rip off customers and raise prices during peak shopping hours.
While “dynamic pricing” — changing prices during times of peak demand — is common in some industries, such as transportation and food service, it can be a controversial topic. Earlier this year, fast-food chain Wendy’s toyed with the idea of changing prices during peak hours, but quickly backed away from the idea, fearing it would upset price-conscious customers.
“These digital price tags could allow Kroger and other grocery chains to move to ‘dynamic pricing,’ where prices on basic household goods could increase depending on the time of day, weather, or other temporary events. This would allow stores to calibrate their price increases to reach the highest levels in 30 years at a time when Americans rely on food for their livelihoods,” the lawmakers wrote in the letter, requesting more information from the grocer about its use of the technology.
Kroger officials said their strategy is to lower prices to attract customers, but they did not answer specific questions about how the technology is being used or how often the prices are changed.
“Kroger’s business model is to lower prices over time so more customers shop with us,” Kroger spokeswoman Erin Rolfes told The Enquier. “Everything we do is designed to support that strategy, and customers are shopping at Kroger more today than ever before because we fight inflation and offer value for money. Any test of electronic shelf labels is designed to further lower prices for customers where it matters most. To say otherwise is untrue.”
Still, the senators pointed to the growing use of the technology and its potential for abuse. They noted that Kroger uses the technology in about 500 stores nationwide. They also raised concerns about the grocer’s use of customer data.
“The increased use of dynamic pricing will boost corporate profits – leaving consumers to foot the bill,” the MEPs wrote.
In addition to Kroger stores, the grocer operates several regional supermarket chains in 35 states, including Fred Meyer, Harris Teeter, Ralphs, Mariano’s, Fry’s, Smith’s, King Soopers, QFC and others. The company has more than 2,700 stores and employs nearly 414,000 people.
