Kamala Harris joins FTC fight against Kroger-Albertsons merger

Amid all the competing headlines of the 2024 election, there may be no more important issue – literally – than how much Americans pay to put food on the table. Republicans are preparing to attack the Biden-Harris administration over escalating food bills, while presumptive Democratic nominee Kamala Harris is now facing their own plan to combat higher food prices.

One of the hottest points in this political dispute is undoubtedly the ongoing Federal Trade Commission (FTC) case, which is trying to prevent the merger of the Kroger and Albertsons grocery stores. A number of Democratic lawmakers recently joined the litigation on the grounds that any potential merger would raise prices, increase food deserts and disproportionately harm unionized workers. As part of her new food pricing plan, Harris called for aggressive antitrust action in the food and grocery industry, mention The Kroger-Albertsons merger was mentioned by name in her speech this week.

None of the arguments against the merger make any factual sense, but the FTC – and the Democratic Party at large – are manipulating the legal cards to achieve a predetermined outcome that conveniently aligns with their political priorities.

The saga began in October 2022, when The Kroger Company and Albertsons Companies Inc. (the parent company of popular grocery chains such as Safeway and Acme, to name a few) announced their plans for a $24.6 billion merger. The FTC immediately launched a 16-month investigation that culminated in a lawsuit in federal court to block the planned merger.

Kroger is the fourth largest supermarket chain in America – behind Walmart, Amazon and Costco – and Albertsons is the fifth largest. After the merger, the combined company would move up to number three on the list. On the surface, this seems to support the FTC's position, but American shoppers should read the fine print.

In reality, a merged version of Kroger and Albertsons, if the deal were to go through, would only 9 percent of total grocery sales. To put this into further perspective, consider that Walmart – the largest grocery retailer in the country – continue operate more stores (including Sam's Club stores) than a Kroger-Albertson merger while maintaining more than twice the grocery sales of the merged company.

In other words, one could easily argue that a joint venture between Kroger and Albertsons is far from being a monopoly, but the best hedge against potential monopolies form among the even more dominant companies that are higher up the food chain. Yet, incredibly, the FTC acts as if two of these larger companies in the market do not even exist, simply by using its own definitions.

The FTC claims that only local supermarkets (which could be considered “traditional” grocery stores) and hypermarkets (like Walmart or Target, which sell groceries among other goods) are included in the grocery market. This narrow definition completely bypasses wholesale clubs (like Costco) and e-commerce companies that sell groceries (like Amazon).

Given that Amazon and Costco happen to be the second and third largest grocers in the United States, the agency is blatantly manipulating the definition of market. The agency has long held the position that the only relevant market is stores where consumers can purchase all or nearly all of their weekly groceries, which begs the question: Has anyone from the FTC set foot in a Costco recently? Many Americans use club stores like Costco and BJ's Wholesale Club as their primary grocery stores, with about 15 percent of Americans ages 18 to 34 reporting that they do most of their grocery shopping at Costco.

Pretending that the Internet does not exist makes even less sense. As the International Center for Law and Economics NotesTwenty-five years ago, just 10,000 households shopped online, while today 12.5 percent of consumers (or over 16 million people) buy their groceries “primarily or exclusively” online. Amazon is also preparing for a major push into brick-and-mortar grocery stores. CEO Andy Jassy Saying last year that the company “needs to find a mass grocery format that we believe is worth expanding broadly.”

Aside from the FTC's tortured market definitions, its arguments for the alleged harm to a Kroger-Albertsons group are equally implausible and outdated. In its complaint, the agency points to the rise in food prices in recent years, and Harris reiterated this, saying she will enact a “ban on price gouging in food and grocery stores” by directing the FTC to impose “tough penalties” on grocers. She also promised to continue aggressive antitrust enforcement in the food sector, going so far as to Highlights the Kroger-Albertsons merger as an example of the type of deal that could raise prices. Commentators have pointed outRising food prices are probably more related to inflation than to a lack of competition in food markets.

In addition to the consumer price damages alleged by the FTC, more than half of the agency's complaint focuses on the alleged harm the proposed merger would cause to unionized workers at Kroger and Albertsons. Both companies are strong unionized– unlike Walmart and Amazon – and the agency claims that a merged company would have more influence over unions because unions would no longer be able to play one company off against the other to develop a bargaining tactic. This ignores the fact that the demand for labor in retail is generally particularly competitive and workers simply leave the ship to another employer if the merged company imposes exploitative conditions.

A final concern highlighted by some Democratic lawmakers is that a merged company could lead to more store closures, which could result in geographic areas with few or no grocery options. Again, this ignores the rise of club stores like Costco and online/home grocery delivery services. These alternatives Reduce the plausible areas within which such food deserts can form, which once again shows a lack of understanding of the modern food market.

Despite the many dubious foundations of the FTC's complaint, it fits with the aggressive antitrust policies of the Biden administration over the past four years. While some observers Keep hope The assumption that a Harris administration might curb overzealous antitrust enforcement with its new food price agenda has put a damper on this (already wishful) thinking.