As headlines fly around the 2024 election, perhaps no issue is more literally close to home than how much Americans pay to put food on the table. As Republicans gear up to attack the Biden-Harris administration for inflating grocery store prices, presumptive Democratic nominee Kamala Harris has fired back: Her own plan To combat rising food prices.
One of the hottest topics in this political battle is undoubtedly the ongoing lawsuit by the Federal Trade Commission (FTC) seeking to block the merger of Kroger and Albertsons grocery stores. Recently joined In her legal battle, Ms. Harris argued that the potential merger would lead to higher prices, increase food insecurity and disproportionately hurt union members. As part of her new food price plan, Ms. Harris included a call for aggressive antitrust enforcement in the food and grocery industry. Mention In a speech this week, she specifically mentioned the Kroger-Albertsons merger.
None of the arguments against the merger are inherently moot, but the FTC, and Democrats overall, are crafting legal maneuvers to achieve a predetermined outcome that conveniently aligns with their own policy priorities.
The story began in October 2022, when Kroger Co. and Albertsons Co. (parent companies of popular grocery chains such as Safeway and Acme) Announced The proposed $24.6 billion merger. The FTC immediately launched a 16-month investigation and ultimately filed suit in federal court to block the merger.
Kroger is Fourth Largest It is the No. 1 grocery store chain in the U.S. behind Walmart, Amazon and Costco, with Albertsons coming in at No. 5. A merger would catapult the combined company into No. 3. On the surface, this may seem like some support for the FTC’s position, but American shoppers would be wise to read the fine print.
In fact, if the deal goes through, the combined size of Kroger and Albertsons would be 9 percent It accounts for 10% of all grocery sales. To understand this further, Walmart, the largest grocery supplier in the United States, Continued It will operate more stores (including Sam’s Club stores) than the combined Kroger-Albertsons company and maintain more than double the combined company’s grocery sales.
In other words, far from a monopoly, one could easily argue that a Kroger-Albertsons joint venture would be the best hedge. Against A potential monopoly could be formed between the more dominant companies in the grocery store food chain, yet incredibly, the FTC, based on its own definition, pretends as if two of these large companies don’t exist in the market at all.
The FTC argues that the grocery market includes only local brick-and-mortar supermarkets (so-called “traditional” grocery stores) and hypermarkets (such as Walmart and Target, which sell groceries along with other products.) This narrow definition completely ignores wholesale club stores (such as Costco) and e-commerce companies that sell groceries (such as Amazon).
Given that Amazon and Costco happen to be the second and third largest grocery retailers in the United States, the FTC is blatantly gerrymandering its definition of the market. The FTC’s long-standing position has been that the only relevant market is the stores where consumers buy all or almost all of their weekly groceries, which begs the question. Has anyone at the FTC stepped foot in a Costco lately? Many Americans use club stores like Costco and BJ’s Wholesale Club as their primary grocery store, with about 15% of Americans ages 18-34 using Costco. Report They do most of their grocery shopping at Costco.
It makes even less sense to assume the Internet didn’t exist. The Center for International Law and Economics writes: NotesTwenty-five years ago, only 10,000 households shopped online, but today, 12.5% ​​of consumers (more than 16 million people) do most or all of their grocery shopping online. Amazon, led by CEO Andy Jassy, ​​is also preparing to make a major foray into brick-and-mortar grocery retailing. say The company said last year that it needed to “identify a mass grocery store format that we believe is worth expanding broadly.”
Beyond the FTC’s distortion of market definition, its claims about harm from the Kroger-Albertsons merger are weak and outdated. In its complaint, the FTC pointed to the recent rise in grocery prices, a point Harris echoed by saying: Enact He called for a “stop-price gouging” on food and grocery products, directed the FTC to impose “severe penalties” on grocers, and promised to continue aggressive antitrust enforcement in the food sector. Highlights The merger of Kroger and Albertsons is cited as an example of a transaction that could lead to higher prices. Commentator Have pointed outRising food prices are more likely to have to do with inflation than a lack of competition in the food market.
In addition to the consumer price harms alleged by the FTC, more than half of the agency’s legal complaint focuses on the harms the proposed merger would cause to unionized workers at Kroger and Albertsons. Heavy MemberIn contrast to Walmart and Amazon, the agency argues that a combined company would have more leverage over unions because unions would no longer be able to pit one company against the other as a bargaining tactic. This is because labor demands are particularly competitive across retail, and workers are increasingly being forced to work for the company. Easy to get off the ship They face exploitative conditions imposed by the merged company and move to another employer.
A final concern raised by Democrats is that mergers could lead to more store closures and create areas with few or no grocery options, again ignoring the rise of club stores like Costco and online/delivery grocery options. These alternatives are Reduce the potential area It once again becomes clear that a poor understanding of modern food markets is what allows such food deserts to take hold.
While the basis for the FTC’s challenge is questionable, it fits with the Biden administration’s aggressive antitrust focus over the past four years. Maintaining Hope There was hope that a Harris administration might rein in excessive antitrust enforcement, but her new food price policy poured cold water on that (already wishful thinking) idea.
