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The following is presented as part of The Columbian’s Opinion content, which offers a point of view in order to provoke thought and debate of civic issues. Opinions represent the viewpoint of the author. Unsigned editorials represent the consensus opinion of The Columbian’s editorial board, which operates independently of the news department.

In Our View: Grocery chain merger wouldn’t help consumers

The Columbian
Published: September 6, 2023, 6:03am

The Federal Trade Commission should heed the advice of Washington’s Mike Pellicciotti and six fellow state treasurers in opposing a merger of the Kroger and Albertsons grocery chains.

Kroger, which owns the Fred Meyer and QFC chains, is the nation’s largest grocery store operator. It is seeking to acquire Albertsons, which owns the Safeway brand and is the nation’s second largest chain, for $24.6 billion.

“We believe that this merger may have significant adverse effects on the financial well-being of the people of our states,” the treasurers wrote. They noted that a study by the Economic Policy Institute suggests the merger could result in a loss of $334 million in wages for 746,000 grocery store workers in more than 50 metropolitan areas.

The treasurers also wrote: “Furthermore, we are deeply concerned about the potential consequences of this merger on the accessibility of essential goods and services. The consolidation of Kroger and Albertsons may lead to the creation of food deserts, which disproportionately affect vulnerable populations and can have severe health implications.”

The key phrase, of course, is that those impacts “may” occur. You can find just as many analysts supporting the merger.

Kroger officials say the company “will not lay off any frontline associates or close any stores, distribution centers or manufacturing facilities as a result of this merger.” They add: “The only parties who would benefit if this merger is not completed are large, non-unionized competitors such as Walmart and Amazon.”

Their interest in the welfare of consumers and employees, however, appears specious. Last year, Albertsons announced a “special dividend” payout of $4 billion, and the Washington State Supreme Court declined to hear a challenge to the dividend. Whether or not the payout is legal, investing in improved goods and services would better serve customers.

But whether talking about grocery chains, telecommunications companies or pharmaceutical conglomerates, the proposed Kroger-Albertsons marriage should spark interest in corporate mergers.

Not all that long ago, the United States enforced antitrust laws to prevent the monopoly of a particular industry. In one example, that led to the 1984 breakup of the Bell System, which controlled a vast majority of telephone technology and hardware throughout the country. It is difficult to say whether wireless technology would have advanced had the system remained intact, but the division helped clear the way for small, innovative companies.

Now, mergers worth more than $50 billion or $60 billion are common, with companies seeking to strengthen their hold on the market, increase stock prices and stifle competition. As a 2016 study in the Harvard Business Review surmises: “Our research raises doubts about the ability of mergers to drive productivity, particularly when two firms in the same industry merge. In such cases, companies may well profit, but not necessarily in ways that improve the economy overall.”

Kroger and Albertsons executives and stockholders might see a need to stem the insurgency of Walmart and Amazon, but that does not necessarily reflect the interests of consumers. The deleterious effects of further monopolizing the industry should be heavily weighed by regulators.

As Pellicciotti wrote to media outlet Washington State Standard: “The tradeoff of narrow, short-term corporate profits at the expense of long-term impacts to wages and consumer costs only furthers the unsustainable imbalance of economic power.”