Last week, a trial kicked off in federal court in Oregon that will likely have a huge impact on both grocery prices and the food industry. The judge overseeing the Federal Trade Commission’s challenge of the supermarket mega-merger between Kroger and Albertsons, Adrienne Nelson, will weigh the FTC’s allegations of vast consumer and worker harm against the companies’ insistence that their deal will lead to lower prices and help the stores better compete with the Walmarts and Costcos of the world. In the next few weeks, we’ll likely know the fate of the FTC’s motion to enjoin the merger in federal court — but regardless, the FTC’s lawsuit has brought into sharp focus how small businesses and workers have a shared stake in stopping runaway corporate consolidation.
The FTC’s complaint rightly focused on how the merger would reduce the bargaining power — and therefore wages — of the tens of thousands of workers, many unionized, who stock shelves and serve customers at Kroger and Albertsons’ stores in the Pacific Northwest and elsewhere.
But as I pointed out in a thread on X, the two companies compete for more than just workers. They are also both major buyers of food, toiletries, over-the-counter medicine and everything else stocked and sold in supermarkets.
The two chains have made no secret about the fact that a major goal of the merger is to give the combined grocers power on par with Walmart — exactly what they want but a disaster for pretty much everyone else in the food industry. The last thing our food system needs is another buyer like Walmart. Walmart is a notorious abuser of buyer power, bullying suppliers into offering it the lowest possible prices. That means those suppliers then have to raise prices to smaller, independent stores in order to make up the money they lose selling to Walmart, threatening those smaller stores’ ever-shrinking margins and their ability to keep their doors open. And every time a small store closes, that’s one less place smaller food manufacturers and startups can sell to, one less local employer, and one lost cornerstone of a community. The domino effect of the big box stores’ buyer power is real, and now Kroger and Albertsons are asking for even more power to set this domino effect into action.
Unions have opposed the merger, and have cheered on an FTC lawsuit that reflects many of their core concerns about lost jobs and bargaining power. But many farmers groups around the country have spoken out against the deal too, over worries that the combined supermarket giant would have the power to squeeze small farmers and ranchers to the point of breaking. “Colorado farmers and ranchers already face an uphill battle to obtain a fair price from grocery stores and grocery suppliers when selling their products,” the Rocky Mountain Farmers’ Union said. “Further decrease in competition would force producers into selling their goods at an untenable price for many family farmers and ranchers to survive.” Meanwhile, the National Grocers Association, which represents independent grocers across the country, cheered the FTC’s lawsuit to block the deal, citing the merger’s potential dangers for shoppers, suppliers and the mega-chains’ smaller rivals.
Meanwhile, two other lawsuits against the merger are playing out in state courts — one in Washington, the other in Colorado. The Colorado lawsuit more clearly focuses on the ways the merger would harm smaller suppliers within that state. For example, the lawsuit ties the merger to the fate of the state’s peach farmers, who grow prized produce in the state. Both supermarkets operate in Colorado and compete for the products they sell, raising the prices they pay to peach farmers and every other supplier. If the mega-merger happens, that competition ends, suppliers will get paid less, possibly threatening their businesses, forcing them to lower workers’ wages, invest less in their businesses, and so forth. The buyer power problems implicit in the FTC’s lawsuit are more explicit in the Colorado case. Both of the state trials are scheduled to begin later this month.
For more background on supermarket consolidation and buyer power, check out Stacy Mitchell’s op-ed in The New York Times, “The Real Reason Your Groceries Are Getting So Expensive” and be sure to check out our fact sheet on price discrimination and the Robinson-Patman Act.
Follow @ronmknox on X for more antitrust updates.