Grocery Deal Threatened by Overreaching Federal Agency

Monopolies are rare in a free market. They can occur in new technologies or when one business drives others out by being more efficient or providing a better product.

But even in these unusual examples, competitors often enter the market to try and take advantage of opportunities or by improving their offerings. The end result is almost always a better deal for consumers.

However, when the government gets involved – whether by protecting “necessary” industries from competition, subsidizing costs or passing regulations to prohibit “anticompetitive” conduct – consumers almost always end up getting a worse deal.

Take the Kroger-Albertsons grocery chain merger, announced in 2022. Last week, the Federal Trade Commission sued to block the deal, alleging the merger “will eliminate fierce competition between Kroger and Albertsons, leading to higher prices for groceries and other essential household items for millions of Americans.”

The regulatory agency added that, “The loss of competition will also lead to lower quality products and services, while also narrowing consumers’ choices for where to shop for groceries.”

The main reason the Federal Trade Commission moved to stop the $24.6 billion deal appears to opposition from the United Food and Commercial Workers union, according to the Wall Street Journal.

“The union often plays the supermarkets against each other in collective-bargaining to obtain bigger wage and benefit increases, as the FTC notes,” the publication wrote.

Indeed, the merger “would immediately erase aggressive competition for workers, threatening the ability of employees to secure higher wages, better benefits, and improved working conditions,” according to a statement by the FTC.

How can the Federal Trade Commission claim to stand up for both consumers and union workers? The two groups have opposing interests: Consumers seek the lowest prices possible, while unions strive for their members to earn as much money as possible. Union efforts to pit companies against one another in contract negotiations result in companies have to pass along higher costs to consumers.

Nevada Attorney General Aaron Ford recently joined a coalition of attorneys general suing to stop the merger. Concerns Ford cited included the deal leading to higher grocery prices.

Ford seemed to overlook the fact that labor using competing companies against each other to raise wages for members also leads to higher prices.

Kroger and Albertsons, both of which serve Nevada, are ranked No. 2 and No. 4, respectively nationwide in terms of grocery sales. Both face significant competition from online and warehouse stores.

Today, Walmart is the largest grocery chain in the U.S. based on revenues, Costco is third and Amazon comes in at No. 8. Walmart alone has larger sales than Kroger and Albertsons combined. The merger is an attempt to remain competitive in a rapidly changing market environment.

Kroger has said no stores would close as a result of the merger, and it has also promised to invest $1.3 billion to update Albertsons’ existing outlets.

There will be some places where stores will be sold to competitor C&S Wholesale Grocers, to placate regulators with monopoly concerns.

But the FTC says the divestiture deal is “inadequate” and the proposal doesn’t contain enough stores or other resources to replicate the competition that currently exists between Albertsons and Kroger.

The FTC is, ultimately, making it harder for both Albertsons and Kroger to remain competitive. And if either chain goes out of business, it’s good for neither consumers nor workers.

The other question to be answered is why the government is involved with helping labor unions get more money from companies.

The United Food and Commercial Workers union, like many labor unions, has overwhelming supported Democrat candidates in recent years.

At the federal level, the UFCW gave more than $1.44 million to Democrat congressional candidates during 2021-22, including $24,000 to those from Nevada. By comparison, its total giving to all Republicans during the same period was less than $2,500.

UFCW groups also made significant contributions to non-federal candidates in the Silver State, handing out $152,500 to individuals running state and local offices, including $15,000 to Ford. The union gave no money to Republican candidates running for state or local offices in Nevada in 2021-22.

It will be some time before the grocery chains learn the fate of the proposed merger. Earlier this week, a U.S. District judge in Portland, Ore., scheduled a hearing on Aug. 26 to debate the FTC’s preliminary injunction bid.

As yet unclear is whether federal and state officials will be questioned during the hearing on where it says the government’s duties include protecting organized labor.