7 months ago
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While U.S. District Judge Adrienne Nelson mulls over details in the Federal Trade Commission-Kroger, Albertsons merger trial, which closed on Tuesday in Portland, Ore., market analysts are offering their take, and it does not look promising for the grocers.
Supermarket News reached out to Eric Fruits, senior scholar at the International Center for Law & Economics, and David Balto, an antitrust lawyer who served as the policy director of the Bureau of Competition for the FTC between 1998 and 2001, and both believe an injunction on the $24.6 billion merger is likely to happen.
“I thought the FTC made a compelling case and the evidence I think is overwhelming that these firms [Kroger and Albertsons] are very substantial competitors and competition benefits consumers,” said Balto. “Probably the strongest part of the FTC’s case is the whole question of whether or not C&S somehow could replace that [Kroger-Albertsons] rivalry. In that respect, [the defendants’] case fell remarkably short.”
The trial centered around the definition of competition. The FTC used several different examples but focused its argument on big-box retailers that have thousands of SKUs under one roof and are considered one-stop shops. That would eliminate smaller stores like Aldi, Trader Joe’s, and dollar stores from the competitive subset. Attorneys for Kroger and Albertsons countered, stating the marketplace has changed and to survive, grocery retailers need to be strong enough to stand up to the likes of Amazon and Walmart.
It was wise of the FTC to use Albuquerque, N.M., as an example on how the merger could wipe out grocery competition in one area, Fruits noted.
“Kroger and Albertsons would have a pretty substantial share of that market, and [the FTC] hammered on that a few times,” he said.
The FTC, according to Fruits, believed it did not have to show a large-scale decrease or increase in anti-competitive behavior, but simply give the impression that all you need to do is find one market negatively impacted by the merger.
“When you have hundreds of markets, it’s just a sheer’s numbers game. It’s always easy to find one,” he said.
Balto said Kroger and Albertsons’ insistence that the market is evolving is a weak point to make.
“The FTC is always focused on people who are looking for that one-stop shopping experience, and you don’t get those at Costco and Amazon,” he said. “Plus, I think there’s very strong evidence that when making pricing decisions … [stores like Kroger and Albertsons] really carefully monitor each other and respond to each other’s competitive initiatives.”
