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on Tuesday The federal government has succeeded in doing what it has not yet done. or even seriously attempted to do so in decades. It persuaded a court to prevent a large supermarket chain from purchasing another store. In a major victory for the Federal Trade Commission, Judge Adrienne Nelson of the U.S. District Court in Oregon has temporarily suspended the merger of Kroger and Albertsons, the nation’s second- and fourth-largest grocery retailers, respectively, deciding that the deal would harm competition in Hundreds of communities A few hours later State courts have struck again. It blocked the merger in a separate lawsuit filed by Washington’s attorney general. The next day, Albertsons announced it was abandoning the deal and suing Kroger for letting it collapse.
The decision is the clearest proof yet that a new antitrust movement is emerging. This merger has sparked fears that grocery prices will rise and supermarket closedIt caught the public’s attention in a way that few antitrust cases have. Judges are people too. And they are aware of the debates about corporate power and competition that have arisen over the past decade. (The organization I co-direct is the Institute for Local Self-Reliance (It’s one of the groups that supports strong law enforcement.) The Biden administration’s push to take a more skeptical view of corporate concentration is gaining traction in the courts. which is an important development This is because judges play an important role in interpreting the law and setting the boundaries of what is considered legal.
But the timing was awkward. The incoming Trump administration has promised to make it easier to enforce mergers. Shortly after Nelson’s decision came out, Donald Trump made a long-anticipated announcement: He would replace current FTC Chair Lina Khan with additional appointees. Friendly to making corporate agreements At least the next four years Significant federal merger challenges may be minimal. Still, states will almost certainly move on with the ball on their own. In the long run, the door to restoring competition enforcement has been opened. Definitely leave And it won’t close easily.
during its heyday of America’s antitrust rulings From the 1930s to the 1970s, few industries faced as much scrutiny as the grocery sector. For example, in 1949 the Justice Department won a landmark case against A&P, the nation’s largest grocery chain. This forced retailers to separate their wholesale divisions.
However, in the early 80s, antitrust agencies were confronting each other. Under the influence of free market economists and legal scholars They decided that the potential efficiencies from consolidation outweighed the dangers of having fewer competitors. Based on this new principle, the FTC has worked through hundreds of supermarket mergers over the past 40 years when it intervened. Companies typically sell a small number of stores in the most concentrated local markets.
Kroger and Albertsons are products of this history. Each one grows with purchases. Dozens Other chains Kroger isn’t just Kroger: there’s Harris Teeter, King Soopers, Fry’s, Ralphs, Smith’s, and more. Albertsons includes Safeway, Jewel-Osco, Vons, Shaw’s, Acme, and more. While both retailers The two companies merged to become competitors. Antitrust enforcers forced little to no speed bumps along the way. It typically required a chain to spin off some of its stores to maintain some semblance of competition when Kroger acquired Fred Meyer in 1999, the largest supermarket merger at the time. The FTC’s only requirement is for the companies to go out of business. eight of 2,200 stores Similarly, in 2015 the FTC allowed Albertsons to acquire Safeway on the condition that it sell 146 stores to Haggen, a smaller retailer. (These so-called merger remedies rarely work As stores that went out of business had to contend with more powerful chains that emerged from mergers, Haggen, for example, soon filed for bankruptcy. Closed many stores and sold others back to Albertsons)
Against that backdrop, the FTC’s choice to challenge the latest merger is remarkable. Khan, appointed by Joe Biden to help reverse the Ronald Reagan-era competitive streak, is famous. As legal academics argue in part, the government should return to focusing on maintaining competition. This is clearly defined by antitrust laws. rather than chasing theoretical efficiency. which they didn’t do But she’s not the one to decide how the law works. The FTC must win the case in court. And federal courts have an important role to play in reducing antitrust. It started before Reagan even took office. In case after case Justices appointed by both sides have dismissed concerns about monopoly power. Refuse to stop mergers in consolidated markets And this makes it very difficult to prove certain antitrust violations in order to be effectively legal. The FTC’s reluctance to challenge the merger can be partly understood as learned behavior from agencies that have been slammed down by the courts.
Kroger and Albertsons appeared to be betting the courts when they announced their intention to merge in the fall of 2022. Following the traditional playbook, the companies promised that the merger would create efficiencies—including enabling job cuts. and allow the two networks to merge. The more information they have about buyers, the better for advertisers to target them, which in turn lowers prices for customers. And they offered to sell some of their stores to competing retailers.
The Nelson decision suggests that companies can no longer assume that courts will rubber stamp these standard reasons. She rejected the companies’ arguments. that the merger will create sufficient efficiencies to offset the damage caused by reduced competition; To support antitrust reformers She does this in part by focusing on real-world evidence rather than theoretical models. Internal company documents and testimony show that in many markets, Kroger and Albertsons view each other as their primary competitors. “You are essentially creating a monopoly in grocery stores through mergers and acquisitions,” one Albertsons executive wrote. Other evidence shows that Kroger raised prices on milk and eggs. It only lowers prices if nearby Albertsons-owned stores do so. (In fact, in a separate trial challenging Colorado’s executive merger, witness Kroger systematically raises prices at “Shops with no comps”, that is, shops in cities with no competition. and keep prices lower in the city than other grocers)
Nelson also rejected plans to divest the company, citing “serious concerns” about C&S, the proposed buyer. It is a grocery wholesaler with limited experience operating retail stores. “Kroger gave us the worst network,” C&S executives complained in internal company documents presented by the FTC. Nelson also pointed to Albertsons’ own history with the failed Haggen divestment, both rulings indicate a new willingness to exercise skepticism over companies’ hypothetical claims. Regarding how the merger will proceed
The question is what’s next for the antitrust and reform movement. Before antitrust activists had time to read the full Kroger decision, the Trump administration announced that Khan would be replaced next year by current FTC Commissioner Andrew Ferguson and former adviser to Republican Mitch McConnell. Let’s move on to the quintessential big business promotion. The selection appears to confirm what the Wall Street world had already assumed: Antitrust enforcement will be friendlier under Trump to corporate mergers than it was under Biden.
Although antitrust recovery will slow over the next four years, But it is unlikely to be reversible. As in the case of Kroger-Albertsons shows there are too many people. Including judges and voters. Looking at this issue with fresh eyes The announcement of the 2022 deal immediately sparked widespread opposition. especially in western areas Both business groups have large market shares and overlap more. 100,000 People submitted comments to the FTC, and the attorneys general of Colorado and Arizona held several public hearings. local officials Including dozens of Alaska lawmakers. state treasurer and Los Angeles City Council member openly calling on the central government to take action Local newspapers include: Anchorage daily news and Royal GazetteThere was continuous news reporting on the case. Opposition to the merger has also led unions. small business and farmers become partners reminiscent of of the old New Deal coalition (So is my organization. resist merger)
The most important thing is Antitrust is not the only part of the federal government. State attorneys general, who are almost all elected, also have law enforcement powers. Arizona Attorney General Chris Mayes Make fighting antitrust a key part of her agenda. Pledging to vindicate her way to Trump, New York’s Letitia James launched an investigation into the proposed Capital One-Discover merger, and DC filed an antitrust lawsuit against the major landlord on charges of corruption. Know and think together to increase prices The trial of Kroger-Albertsons It may be the last hurray of Lina Khan’s FTC tenure, but it may not be the last victory for the movement that Khan represents.
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