Release Date: October 19, 2022
BUFFALO, NY – In a push to compete with Amazon and Walmart, two of the largest U.S. supermarket chains – Kroger and Albertsons - are hoping to merge, which could change the supermarket landscape. If approved, the $24.6 billion deal would transform the companies into a 5,000 store behemoth. One of the reasons given for the merger, was for the companies to better compete with Walmart and others who sell groceries. However, many questions remain about the possible implications of this prospective deal.
Christine Bartholomew, professor of law and expert on corporate monopolies, says that the merger is an important bellwether.
“The Federal Trade Commission under the current administration has publicly articulated a more pro-consumer, stronger oversight posture,” said Bartholomew. “Its position on this merger will be the first real test of whether the Federal Trade Commission plans to align its words and regulatory actions.”
Kroger and Albertsons believe that their increased size will help reduce prices for consumers. However, there is skepticism that that prices will actually increase – which will increase profit for shareholders.
Bartholomew says it comes down to the details of the arrangement. “Most every merger includes promises of lower prices,” said Bartholomew. “But merging doesn't magically reduce costs — and not all cost reductions impact our pocketbooks. While merging may allow the grocery chains to reduce redundant overhead, it's not clear that those gains will be passed on to consumers. This is a particular concern when the second and third largest players in an industry are planning to merge.”
A worrisome component of the merger is the justification offered by Kroger and Albertsons. The companies contend that the merger is necessary to compete against Walmart and fight inflation. Bartholomew believes that these justifications, alone, should not be enough.
“Regulators should not approve the merger simply because two competitors want to compete more effectively with the prevailing dominant big box or online retailer,” said Bartholomew. “Nor is inflation enough to justify losing one of the top three market players. If regulators treat these justifications as reason enough to approve the merger, the long-term ramifications are significant. It could drive further consolidation across multiple industries at a period in time already marked by significant market concentration. Long term, this would mean less consumer choice.”