Antitrust concerns in the technology sector could weigh on regulators’ deliberations on the proposed merger of Kroger and Albertsons, according to some industry observers.
The upcoming supermarket merger comes as the US government has taken a closer look at mergers overall. While the “old school” of antitrust thinking was strictly focused on keeping prices as low as possible for consumers, a “new school” has emerged in recent years that involves other factors, Ronald Lunde said , director of consulting firm The Lunde Co.
These factors include calls to combat perceived lax antitrust enforcement, particularly in the technology sector, and additional calls to consider other implications of consolidation, such as the impact on workers, independent businesses and underserved communities.
In January this year, the Federal Trade Commission and the Justice Department launched a public inquiry aimed at modernizing merger policies to better detect and deter anticompetitive deals, Lunde noted.
This follows Senator Amy Klobuchar’s (D-Minn.) introduction of the Competition and Antitrust Reform Act last year, which she says focuses on a belief that current antitrust enforcement and laws are structurally weak and unregulated and allow uninvestigated mergers.
“The Kroger-Albertson merger could well be the proverbial crossroads of whether there has been too much or too little antitrust enforcement,” Lunde said. “Congress, the DOJ, and the FTC have yet to make this decision.”
Austin Freerick, The associate director of the Thurman Arnold Project at Yale University, which specializes in antitrust law, told SN that the current antitrust climate does not bode well for the Kroger-Albertsons merger.
“In previous governments, that kind of merger would have worked,” said Frerick, who did it also co-chair of the Biden campaign Agricultural Antitrust Policy Committee. “At this point, I expect they will take action to prevent this merger from happening, given the bipartisan backlash to it.”
As previously reported, Kroger and Albertsons have announced they may seek to form a spin-off company that would operate between 100 and 375 businesses, which would need to be divested to address antitrust concerns. The CEOs of the two companies have already appeared before a Senate subcommittee investigating the merger, although the FTC and/or DOJ will have the final say on antitrust considerations.
Another aspect of the proposed $24.6 billion merger, which is expected to close in early 2024, is that grocery e-commerce has been gaining increasing market share over the past two years.
in one Food antitrust law report Following the deliberations released last year, consulting firm Brattle said the FTC could start giving more weight to online grocers as it considers grocery competition.
“Although there has been little precedent for including online retail as a significant competitive factor when evaluating traditional grocery retail mergers, given the rapidly growing number of consumers who are sourcing their weekly grocery shopping from a single source via the internet and other traditional retailers [like Amazon] During the COVID pandemic, the FTC will likely need to consider expanding its relevant market definitions to include these options as significant competitive restraints for traditional grocery retailers,” the report concluded.
However, Frerick said he doesn’t think the rise of online groceries will have a significant impact on how regulators view the grocery market.
Lunde, meanwhile, said consumers of all income brackets appear to have access to multiple places to shop for groceries, including online, based on his research with Dr. Martin Paul Block from Northwestern University using Prosper Analytics and Insights Data.
For example, based on a recent snapshot of the data, consumers reported shopping for groceries at 3.7 different stores and spending 17.5% of their grocery dollars online. Those numbers drop slightly to 3.4 stores shopping and 14.9% spending online for households earning less than $15,000 a year.
“Currently, consumers do not appear to face any significant barriers to accessing physical grocery stores or online shopping, as defined by annual household income,” Lunde said based on this data. “Consumers report shopping across multiple stores regardless of their income and appear to have relatively equal access to online shopping when they choose to do so.”