OTHER VIEWS: Merger would leave consumers holding the bag
Published 5:00 am Friday, October 13, 2023
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Food shoppers can only hope the Federal Trade Commission and the Department of Justice challenge the attempt to proceed with the merger between Kroger and Albertsons, and send the two companies back to their competitive ways.
But that is hardly a given as America’s antitrust enforcement has fallen on hard times, with critics complaining that the federal government is standing idly by while the growing power of corporations and the wealth they generate for American oligarchs widens the inequality gap beyond recognition.
It’s not as though there is no precedent for government protecting consumers from runaway capitalism. Although it’s called the free enterprise system, it’s not always “free” to do as it wishes and that is a good thing for consumers and citizens. The federal government and the states have many checks on unbridled capitalism that inflicts harm and sometimes death on consumers.
The grocery business is subject to the rules of the Federal Drug Administration and the U.S. Department of Agriculture which regulates products sold in stores.
Yet, how could it be that shoppers can become the victims of a deal perpetrated by corporate leaders who stand to gain the most personally from the millions they will make from the deal? Here we have the private sector’s 21st-century equivalent of the “smoke-filled room” where it all takes place. It’s the sterile corporate boardrooms of corporations who create schemes to enhance their own welfare at the expense of a public who shows up at the grocery store with nary an ounce of control over the prices of the goods.
Kroger CEO Rodney McMullen, and Albertsons CEO Vivek Sankaran, whine about competing with Walmart and Target as they justify the creation of this supermarket titan by claiming it will allow them to cut prices for consumers. That claim has been laid to rest by more than one study of economists who cite evidence that prices rise rather than fall after these mergers.
Labor economists who study the issue of mergers and their impact on prices reach conclusions that bear little resemblance to the claims of Kroger and Albertsons CEO’s. One study by economists Justin Pierce of the Federal Reserve Board and Bruce Blonigen of the University or Oregon found that mergers increase market power — no shock there — and generate higher profits by raising prices. They also found no evidence to support another claim that mergers increase efficiency.
Another clever ploy by Kroger is its announcement that it will divest the new company of over 400 stores, yet unnamed, to convince the FTC that the grocery business will still be competitive. That too appears to be a specious contention thanks to the work of Don Day of BoiseDev who found evidence from another era when Albertsons bought a Montana company and agreed with the FTC to sell some of the stores to make the merger more acceptable to the FTC.
It hardly improved competition because BoiseDev learned that 13 of the 15 stores soon went out of business. So much for the competition thing.
The details are missing as to which Albertsons stores will be transferred to new ownership, but the Albertsons you call your shopping home may disappear before your very eyes and who knows what level of quality will replace it.
The Biden Administration has weighed in recently on antitrust enforcement. The Justice Department and the Federal Trade Commission proposed more than a dozen new guidelines to update federal enforcement procedures on mergers and acquisitions, all with the intent of determining a merger’s impact on competition. Although the new guidelines may have been aimed principally at the tech sector, it’s clear from the anti-competitive language used to describe the mergers of today that King Kroger’s plan may not pass muster under the new rules.
Seven state attorneys general from states affected by the proposed merger have also voiced opposition to the merger in a letter to the FTC.
Competition is key to reducing the power any one company can leverage over consumers so let’s hope the corporate monarchs of Kroger and Albertsons are foiled by the FTC and the Department of Justice so they must compete just like businesses up and down Main Street USA.