If you're a titan of industry thinking about flexing your muscle and buying up a rival company ... you might wanna think again.
Washington's antitrust authorities are taking a hard line against anticompetitive behavior, and they're not letting up anytime soon.
See here: The Federal Trade Commission on Monday sued to block a $25 billion merger between the country's two largest supermarket chains, Kroger and Albertsons, arguing that it would lead to higher prices for consumers and lower wages for more than 700,000 workers.
The two chains, which announced their tie-up in 2022, operate thousands of stores across the country, including Fred Meyer, Harris Teeter, King Soopers and Safeway.
From their perspective, Kroger and Albertsons (which employ mostly unionized workforces) want to merge so they can better compete against non-union giants like Walmart and Amazon. (They're also fending off pressure from Aldi, the German discount chain that's growing aggressively in the US.)
The companies argued that they'd be able to use $500 million in cost savings from the deal to reduce prices for shoppers.
Of course, every merger in history has promised cost savings that redound to the consumer — it's hardly a guarantee those savings will be realized, and the companies could just as easily redirect extra cash to shareholders. Last week, you may recall, Capital One and Discover made a similar pitch for "great deals" for their customers if the two credit card companies are allowed to carry out their $35 billion deal.
The FTC was, unsurprisingly, skeptical of that claim.
The commission is also skeptical of the grocery chains' proposal that they would sell 400 stores in markets where their stores overlap to address antitrust concerns.
That divestiture proposal was a "hodgepodge of unconnected stores, banners, brands, and other assets that Kroger's antitrust lawyers have cobbled together" and would not be a "successful competitor against a combined Kroger and Albertsons."
Kroger said it would fight the FTC's effort to block the deal, my colleague Nathaniel Meyersohn writes. A Kroger spokesperson said the FTC's move would "harm the very people the FTC purports to serve" while strengthening larger, non-union retailers like Walmart "by allowing them to further increase their overwhelming and growing dominance of the grocery industry."
In addition to potentially hurting consumers, the tie-up could reduce labor competition, undermining wages for all grocery store workers in several regions — not only those workers currently employed by Kroger or Albertsons, according to research from the left-leaning Economic Policy Institute. On average, grocery workers in affected markets will lose about $450 per year in wage income, EPI researchers wrote.
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Last year, the Biden administration set a new record for merger enforcement activity, per Bloomberg. His appointees at the FTC and Justice Department haven't shied away from a fight in three years, whether it's against Amazon or Microsoft or JetBlue.
It should be no surprise that Kroger and Albertsons' proposed deal is facing resistance now, given Americans' outrage over high grocery prices.
US consumers are currently paying about 25% more for groceries than they did in 2020. That sharp rise has become a political liability for Biden, whose economic accomplishments in office have been largely overshadowed by inflation.
