SUBSCRIBE TO OUR FREE NEWSLETTER
Daily news & progressive opinion—funded by the people, not the corporations—delivered straight to your inbox.
5
#000000
#FFFFFF
To donate by check, phone, or other method, see our More Ways to Give page.
Daily news & progressive opinion—funded by the people, not the corporations—delivered straight to your inbox.
Why stopping the Kroger-Albertsons merger is an important step along the way to a more fair and balanced economy.
In front of the Federal Trade Commission building on Pennsylvania Avenue in Washington, D.C., where I used to work, stands a giant sculpture of a runaway horse being reined in. It’s called “Man Controlling Trade.” The allegorical sculpture by Michael Lantz is one of a pair installed in 1942, part of a New Deal-era program administered by the Section of Painting and Sculpture of the Treasury Department to commission works of art for federal buildings.
The idea that government should rein in the wild forces of capitalism was by 1942 well established. America had gone through a catastrophic Great Depression that revealed the need for stronger regulation of business and finance. The nation had also begun to mobilize the economy to fight World War II.
America then understood that stable prices and good wages depended on government taming corporate greed for the common good. This wasn’t socialism or communism. It was democratic, progressive capitalism. It was a means of saving both capitalism and democracy.
“Man Controlling Trade” by Michael Lantz
Last week, in a court in Oregon, the Federal Trade Commission began to rein in two giant runaway grocery chains — Kroger and Albertsons — that want to merge into the biggest grocery combination in history and gallop away with your money and many workers’ wages.
It’s the first time anti-monopoly law has been used both to tame consumer prices and help workers gain better wages. The case illustrates how the Biden-Harris administration is seeking to restructure the economy for the common good — and what the Harris-Walz administration will, hopefully, have the opportunity to do even more of.
Three arguments undergird the FTC’s case:
(1) Grocery prices are already through the roof, in part because there’s not sufficient competition in most local grocery markets to force chains to lower their prices. Kroger and Albertsons are the two biggest grocery chains in America. If they’re allowed to merge, the combined company, plus Walmart, will control 70 percent of the grocery market in over 150 cities. That means even higher prices.
(2) The proposed $24.6 billion merger would not only put 5,000 American grocery stores under one corporation. It would put 41 retail grocery brands and 4,000 pharmacies under the same corporation. It would signal to every other industry they can make big profits by further monopolizing.
(3) If allowed to combine, Kroger and Albertsons would also put their combined 700,000 workers under one corporation. These workers would then have to bargain with just one take-it-or-leave-it giant grocery chain. This would erode their bargaining power, leading to lower wages, worse benefits, and weaker worker protections.
This last point — the relationship between corporate concentration and lower wages and benefits — is almost never raised in antitrust litigation yet it’s hugely important for understanding the current structure of the American economy and why so many American workers justifiably feel shafted.
**
Since the late 19th century, the U.S. government has been deciding the extent to which corporations can join together to gain market power, and workers can join together in labor unions to gain bargaining power. This balance of power has had as much effect on prices and wages as supply and demand — in fact, it undergirds supply and demand.
In 1890 and then again in 1914, the United States enacted anti-monopoly laws. Teddy Roosevelt and Woodrow Wilson were fierce trust-busters. In 1935, FDR signed into law the National Labor Relations Act, which allowed workers to form labor unions and required employers to negotiate in good faith with those unions.
By 1950, big business and big labor were in rough balance. That balance of power was central to the growth of both the American economy and the American middle class. It fostered a basic bargain: As corporations became more profitable, their workers did, too.
Sources: Historic Statistics of the United States, Unionstats.com.
Over the last 40 years, though, union power has dropped precipitously while corporate power has soared. The result has been near-record levels of inequality (see chart, above).
In 1955, over a third of all workers in the private sector were unionized, which gave them considerable bargaining power to get higher wages. (Employers whose workers weren’t unionized often offered their workers almost the same wages and benefits as those in the unionized sector, to fend off unionization.)
Now, only 6 percent of private sector workers are unionized.
Meanwhile, over just the last two decades, more than 75 percent of U.S. industries have become more concentrated.
Four beef packers now control over 80 percent of their market, domestic air travel is now dominated by four airlines, and many Americans have only one choice of reliable broadband provider. Just four companies — Walmart, Costco, Kroger, and Albertsons — dominate the grocery industry.
When few workers are unionized, wages remain stagnant or decline. Without adequate competition, prices and corporate profits rise. The result: Wealth is siphoned off from workers and consumers to large corporations and shareholders.
In the late 1970s, I worked at the Federal Trade Commission, which actively fought anti-competitive mergers and monopolies. But the Reagan administration eased up on them. Reagan also encouraged attacks on unions, as exemplified by his firing of striking air traffic controllers (who, in truth, had no right to strike).
The Biden administration has made priorities of both cracking down on corporate concentration and strengthening labor unions.
Lina Khan, chair of the FTC, and Jonathan Kanter, assistant attorney general for the antitrust division of the Justice Department, have been aggressively fighting corporate power. Jennifer Abruzzo, general counsel of the National Labor Relations Board, has been aggressively protecting workers’ organizing rights.
But there is far, far more to do. Last week, Khan, Kanter, Abruzzo, and Labor Secretary Julie Su signed a memo of agreement, enabling them to coordinate their efforts even more.
But they also need more resources to do their important work. Inequality is out of control. Big corporations are more profitable than ever. CEO pay is bonkers. (Kroger paid its CEO $15 million last year, which was 502 times what the typical Kroger employee earned. If the merger goes through, Albertsons’ CEO would receive $43 million, on top of his $15.1 million compensation.)
Yet most workers are still receiving a small portion of the economic gains. According to the latest estimates, the median household income is $74,580.
Both sides of the economic equation — corporate power and worker power — must be addressed. The Biden-Harris administration has made a good start at reining in corporate power and strengthening worker power. Stopping the Kroger-Albertsons merger is an important step along the way.
Here’s hoping the Harris-Walz administration will take many more such steps.
Happy Labor Day.
"The thing is, execs all over the economy were saying this stuff on their earning calls back in 2021," said one progressive economist. "This was not a secret."
A top Kroger executive admitted under questioning from a Federal Trade Commission attorney on Tuesday that the grocery chain raised its egg and milk prices above the rate of inflation, a concession that came as no surprise to economists who have been highlighting corporate price gouging across the U.S. economy in recent years.
Andy Groff, Kroger's senior director for pricing, said during a court hearing on the FTC's legal challenge to the company's proposed acquisition of Albertsons—its primary competitor—that Kroger's objective is to "pass through our inflation to consumers."
Groff's comment came in response to questioning about an internal email he sent to other Kroger executives in March. In that note, Groff observed that "on milk and eggs, retail inflation has been significantly higher than cost inflation."
A Kroger spokesperson told Bloomberg in a statement that the email was "cherry-picked" and "does not reflect Kroger's decadeslong business model to lower prices for customers by reducing its margins."
But Rakeen Mabud, chief economist at the Groundwork Collaborative, noted Wednesday that "execs all over the economy were saying this stuff on their earning calls back in 2021."
"This was not a secret," Mabud added.
Bloombergreported Tuesday that "in Illinois, where Kroger operates the Mariano's chain, company executives create a weekly report on egg prices, comparing prices from Walmart, Meijer Inc., and Albertsons' Jewel-Osco, said Matthew Marx, president of the Kroger division overseeing Mariano's."
"The FTC walked Marx through several of the weekly egg reports from 2022 and 2023," the outlet added. "In May 2022, for example, both Walmart and Meijer dropped egg prices by 14 cents a dozen, but Mariano's opted to keep its pricing the same to match the higher price at Jewel-Osco, Marx said. A year later, in April 2023, as egg prices again soared, Mariano's opted to keep its pricing near Jewel-Osco's even as Walmart was lowering its own."
The U.S. grocery sector—dominated by Kroger, Walmart, and a handful of other major companies—profited hugely during the Covid-19 pandemic as corporate giants exploited supply chain disruptions to aggressively jack up prices.
"The grocery industry, as represented by four of its largest players, became more profitable in the pandemic, and it has stayed that way for a couple of years at least," The Financial Timesnoted Monday. "It is a good guess that price increases in excess of cost increases have played a role in this."
In its legal challenge against Kroger's proposed merger with Albertsons, the FTC argues that the deal would further drive up costs for consumers by eliminating "fierce competition" between the two grocers.
Laurel Kilgour, research manager at the American Economic Liberties Project, said after opening arguments in the case earlier this week that the FTC "previewed concrete evidence that a Kroger-Albertsons merger would lead to higher prices for millions of Americans and worse working conditions for hundreds of thousands of workers."
"By contrast, lawyers for Kroger and Albertsons touted fake promises of utopian outcomes that are not legally enforceable. Indeed, Albertsons has a track record of profiting from similar fake promises that turned out disastrously for competition and for communities, and this time is no different," Kilgour continued. "At a time when working families are especially concerned with costs and access to food, we need more—not less—competition between grocery stores on prices, wages, the freshness of produce, and service quality."
"As grocery store 'price gouging' reaches the top of the political ticket, the FTC is intervening to protect consumers and workers from further harm."
As grocery giants Kroger and Albertsons faced the U.S. Federal Trade Commission in a federal court Monday, economic justice advocates said Americans should be wary of the corporate media's reporting on the FTC's lawsuit, which aims to block the companies' proposed $24.6 billion merger.
"Get ready for more takes like these from corporate media," said the American Economic Liberties Project (AELP), posting on social media a clip from CNBC in which anchor Joe Kernen echoed Kroger and Albertsons' claims that the merger would help them compete with big box stores like Walmart, lower prices for consumers, and benefit workers.
"With a merger this blatantly harmful to consumers, workers, and countless local communities, Wall Street cheerleaders can't help but rely on misleading arguments," said AELP.
The trial, kicking off in a U.S. District Court in Portland, Oregon, centers on a claim by the FTC along with eight states and the District of Colombia that the merger would reduce industry competition—creating "a straight-up monopoly" in small communities like Gunnison, Colorado where 6,000 residents "would have to drive 65 miles to reach a non-Kroger supermarket," according to AELP.
FTC Chair Lina Khan is also opposing the merger because it would weaken unionized workers' bargaining power, particularly in parts of the country where dozens of Kroger and Albertsons stores are located near each other.
With 115 of 159 Albertsons stores located within two miles of a Kroger in Los Angeles County and Orange County, California, the United Food and Commercial Workers International Union (UFCW) has warned that hundreds of unionized workers could see their stores close if the merger is finalized.
As the trial began Monday, The New York Times published an interview with an employee of an Albertsons subsidiary in Woodland Hills, California. Leonard De Monte was represented by the UFCW in 2015 when the grocery store he was working at was sold as part of Albertsons' merger with the store's parent company—a deal that was called "an unmitigated disaster" for workers by AELP senior legal counsel Lee Hepner.
De Monte found another job at the Albertsons subsidiary, but was demoted to minimum wage. Now nine years later, after working his way up to a $27-per-hour union wage, the store De Monte works at is once again at risk of being sold if the merger goes through, and he fears being demoted to minimum wage again and losing his benefits.
"I have great health benefits because I've been with the company so long," he told the Times. "If I lose my health benefits, I would have to pay out of pocket."
Despite the stores' claim that they need to compete with Walmart and Amazon, AELP pointed out in March that Kroger and Albertsons acknowledge one another as their top competition. Without the two stores competing, said the group, "grocery workers will lose bargaining power, both because individually they won't have a competing employer to go work for, and because unions will lose leverage during contract negotiations. As a result, workers will potentially face lower wages, worse working conditions, and layoffs."
According to an analysis by the Economic Policy Institute, the merger would reduce the total annual earnings of grocery store workers in affected metropolitan areas by $334 million.
In court on Monday, the FTC displayed text messages showing that Kroger executives have complained that Albertsons has forced it "to accept more worker compensation."
The progressive think tank Roosevelt Institute said the trial, which is expected to go on for three weeks, shows that Khan and the FTC are "taking the harms of corporate consolidation on workers seriously."
Kroger's arguments and business practices—including using "dynamic pricing" to price gouge and its exorbitant CEO pay—represent "corporate greed at its absolute worst," said former U.S. Labor Secretary Robert Reich.
"The Kroger-Albertsons merger would eliminate head-to-head competition between grocery stores across the country," said Hepner. "As grocery store 'price gouging' reaches the top of the political ticket, the FTC is intervening to protect consumers and workers from further harm."