Yet busybodies from Washington to Sacramento want to block Kroger’s plan to buy the Albertsons chain for $24.6 billion. They’re so hostile to the proposal that Kroger is even on trial: The Federal Trade Commission, California Attorney General Rob Bonta, seven other state attorneys general and the District of Columbia sued earlier this year to stop an agreement reached voluntarily by two private entities.
“As the People’s Attorney, it is my honor to stand up to big corporations who only care about their bottom line and directly contribute to this unaffordability. That is exactly what we are doing with this lawsuit,” Bonta said in a news release issued on the first day of the trial that started late last month. “This merger will leave Californians with fewer choices over where to shop – and for workers in this industry, where to work. We are in court today to prevent this unlawful attempt by Kroger and Albertsons to merge their operations and reduce competition in the marketplace.”
It’s chilling that Bonta calls himself “the People’s Attorney” – especially in capitalizing the “P.” Does this not evoke images of … Maoism?
Maybe it’s just a marketing tool for future political ambition. But that doesn’t make Bonta’s position morally defensible.
Should the merger of the two largest grocers in the country go through, it will create a 5,000-store chain, which Clinton Labor Secretary Robert Reich derisively labeled a “mega company.” Trust-busters want the public to believe the new company would be a disaster for workers and consumers, a “monster-sized entity” and a threat apparently to all that is right and wholesome.
Of course, this is political drivel and uninformed opinion. The merger would allow the new company to better compete with low-price Walmart, which, with more than 5,300 units, is the largest grocer in the country. Maybe it’s a monster, but that size is good for consumers. “It’s able to beat local grocery chains on pricing thanks to its scale,” says the Motley Fool.
A Kroger-Albertsons chain would have that same scale, allowing it to price its goods as low as Walmart’s and still make a profit on the grocery industry’s thin margin of 1.6%.
Engaging in a bit of embellishment, the FTC’s trial lawyer warns that Albertsons would be “swallowed” by Kroger in the deal, but she and others miss an important point: Albertsons needs to be consumed by the larger Kroger. Albertsons CEO Vivek Sankaran testified that if the merger is blocked, consumers should expect there to be store closures and workers will have to deal with layoffs.
No one can honestly argue that employees won’t be laid off after a merger, though Kroger CEO Rodney McMullen has testified both parties are committed to ensuring “that no frontline workers will lose their jobs and no stores will close as a result of the merger.” But should it happen, the losses will be the result of market pressures and not an act of central planning from an overactive government.
In any event, it’s not hard to imagine that a liquidated company such as Bed Bath & Beyond would have been grateful to have been “swallowed” up by a larger company.
Opponents have also left out the fact that even with Walmart and Kroger-Albertsons holding a combined 43% of the grocery market, there would still be competition from: Target with its more than 1,900 stores; high-end chains such as Whole Foods and Sprouts; consumer favorites Trader Joe’s and Aldi (which combine for nearly 3,000 locations); more than 2,000 IGA stores, which are part of the world’s largest independent grocery chain; and discount houses Costco and Sam’s Club. Amazon is even a competitor – and might be the future of grocery sales. The point is, no one knows what grocery shopping will be like in 10 or 20 years, not even elected officials and red-tape administrators.
No matter how they play it, the militant opponents’ sole interest in rejecting the merger is not for consumers’ benefit but their commitment to union bosses, who are invested in seeing it fail. It’s an interesting position for them to take, though, because union jobs will probably be lost no matter what happens to the deal, and the bloodiest outcome is likely to happen if it’s blocked.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute and co-author of the PRI book, The California Left Coast Survivor’s Guide.
