Will a Kroger-Albertsons merger assist prospects or harm them? What the FTC chair warns

The most important proposed grocery merger in U.S. historical past is being challenged in court docket, with Federal Commerce Fee antitrust regulators saying a merger might increase grocery costs at a time when prospects are already struggling. 

Grocery store chains Kroger and Albertsons insist their proposed $24.6 billion deal would enable them to decrease costs and extra successfully compete with retail giants like Walmart. Many economists have lengthy argued that when corporations merge, costs typically come down due to efficiencies of scale. Federal Commerce Fee Chair Lina Khan says that won’t at all times be the case.

“Even when these efficiencies come up, if the corporate’s not checked by competitors it will not have an incentive to cross these advantages on to the buyer as a result of these shoppers might not have wherever else to go,” she mentioned. 

Why are meals costs so excessive?

Khan, who attends “listening excursions” in communities all through the U.S., just lately heard from an attendee about grocery worth frustrations. It has been a difficulty the nation has been confronting for years.

“Each time I’m going to the grocery store, I get sticker shock,” a listening tour attendee mentioned to Khan. “Groceries are so costly now.”

Since 2019, the typical worth of a dozen eggs has risen 126%, whereas the worth of a loaf of bread jumped 54% and a pound of rooster breast rose 33%, in line with the CBS MoneyWatch price tracker. Total, grocery prices have jumped about 25% since January 2020. 

Larger costs at supermarkets could be linked to increased manufacturing prices and lingering provide chain points from the COVID pandemic and bird flu.

“The COVID-19 pandemic positioned great strain on the provision chains that produce and transfer the nation’s meals from farm to desk,” the FTC wrote in a March report. “When unexpectedly put beneath sustained stress, there weren’t sufficient further arms prepared to choose up the work of sick colleagues, not sufficient spare vans and truck drivers able to haul extra masses, and no straightforward strategy to instantly ramp up manufacturing to fulfill surging demand.”

Khan mentioned there’s numerous dialogue about what’s driving the inflation. 

“What’s been attention-grabbing is that whilst a few of these provide chain pressures have eased, costs haven’t come down concurrently as a lot,” Khan mentioned.

Some, together with President Biden, who named Khan to her place in 2021, have additionally pointed to “greedflation” — the notion that corporations will opportunistically increase costs to profit their very own revenue margins. 

“We have truly seen some executives boast on earnings calls about how inflation is nice for his or her backside line,” Khan mentioned.

The FTC’s function in combating expensive groceries 

Final month, Khan mentioned the FTC would probe why grocery costs stay excessive.

“We need to guarantee that main companies are usually not exploiting their energy to inflate costs for American households on the grocery retailer,” she mentioned in Aug. 1 prepared remarks. 

One of many methods the FTC fights to maintain costs down is by breaking unlawful monopolies and blocking mergers that stifle competitors. 

The FTC grocery go well with focuses on Kroger, which owns Ralph’s; and Albertsons, which owns Safeway. Collectively, the 2 corporations have almost 5,000 places throughout the nation. Khan says a merger dangers elevating meals costs even increased than they’re now. The chains deny they might exert monopoly energy and say that merging would enable them to decrease costs.

Legal professionals for the grocery store chains and the FTC gave their closing arguments earlier this month. Individually, Washington and Colorado have sued to dam the merger.

Lesley Stahl

One among America’s most acknowledged and skilled broadcast journalists, Lesley Stahl has been a “60 Minutes” correspondent since 1991.