By Diane Bartz

WASHINGTON (Reuters) -California Attorney General Rob Bonta said on Thursday that his office was concerned about Kroger's proposed deal to buy rival Albertsons for $24.5 billion, and may sue to stop it.

Bonta said the decision has not been made, but added: "Right now there's not a lot of reason not to sue."

Bonta cited as concerns the prospect of higher prices for consumers, lower payments to California farmers, the potential for creating food deserts and possible adverse impacts on workers.

The deal, announced in October 2022, would create a grocery chain with nearly 5,000 stores. In September, the companies announced a plan to sell more than 400 grocery stores to C&S Wholesale Grocers in an effort to get regulatory approval for the deal.

The companies did not immediately respond to a request for comment.

Walmart is the biggest U.S. grocer with 34.8% of the market, according to Food and Water Watch.

Bonta, who spoke in Washington, said he had met with Federal Trade Commission Chair Lina Khan, and that the grocery merger had been discussed along with other matters. The FTC is reviewing the deal to ensure it is not in violation of antitrust law.

Bonta's office had also been looking into whether the deal would make it harder for people in poorer parts of cities or rural areas to buy medicines because it would create "pharmacy deserts."

Research from the University of Southern California in 2021 found one in three neighborhoods in 30 populous U.S. cities had inadequate access to needed pharmacy services.

(Reporting by Diane Bartz; Editing by Leslie Adler and Bill Berkrot)