Kroger Co. plans to buy Albertsons Cos. in a $24.6 billion deal, one of the largest mergers in the history of the U.S. grocery industry.

If approved by officials, the deal would unite America’s two largest grocery chains, creating a new grocery giant with increased scale, market share and negotiating power.

The companies say, combined, they would save millions in operating costs and shorten the time it takes produce to reach store shelves. The new company would also be better positioned to compete with Walmart, which controls 22% of the domestic grocery market.

Critics: Too much power

Critics, however, say the deal could stifle free-market competition by putting too much power into the hands of too few corporations, potentially hurting independent grocers and farmers who supply the stores.

The merger could influence the prices farmers are paid for the food they produce, experts say.

“As a general matter, the larger size of the combined retailers will increase their purchasing power, granting them the ability to force down prices paid to members of their upstream supply chain, including producers and farmers,” said Gregory Gundlach, marketing and logistics professor at the University of North Florida and treasurer of the American Antitrust Institute.

A merger might also accelerate consolidation in the farm sector because giant grocery companies tend to buy mainly from large-scale farms or cooperatives.

“If history is any indication, the merger, if approved by U.S. regulators, will result in further consolidation through the supply chain all the way to growers,” said Mark Powers, president of the Northwest Horticultural Council, representing the tree fruit industry.

Experts say the deal would propel a reorganization of the grocery industry.

Kroger, based in Ohio, operates 2,800 stores. Albertsons, based in Idaho, has 2,273 stores. Together, the companies would supply groceries to an estimated 85 million households.

Analysts: Review ahead

Analysts say the merger is likely to face rigorous review by federal antitrust regulators.

To win regulatory approval, Kroger and Albertsons said they plan to divest, or sell, stores in markets where the companies have significant store overlap. J.P. Morgan analysts predict the companies may need to divest 350 to 450 stores to appeal to regulators.

If competitors do not step up to buy these facilities, it could mean fewer grocery stores in some communities.

Even if independent grocers do buy the stores, some are concerned they would be at a competitive disadvantage.

Unfair competition?

Greg Ferrara, president and CEO of the National Grocers Association, which represents small retailers and wholesalers, said the merger would “put smaller competitors at an unfair disadvantage.”

In a conference call, Kroger CFO Gary Millerchip said his team is confident of “a clear path forward to achieve regulatory approval with divestitures.”

Some critics are also concerned that a merger could lead to food price hikes for consumers.

In response, Kroger said it has “a long track record in lowering prices.” Kroger plans to direct about $500 million in cost savings toward lowering food prices.

The companies said they expect to close the deal in 2024.

Meanwhile, the merger will receive scrutiny from politicians. In November, Sens. Amy Klobuchar, D-Minn., and Mike Lee, R-Utah, on the Senate Judiciary antitrust panel, plan a hearing on the merger.