Newmann: Soap on a rope
It seems that most folks, when given an opportunity to buy the same product from two competing sources, will opt to purchase from the supplier who charges less for the item.
So when Kroger and Albertsons, two of the largest competing supermarket chains, announced in 2022 that they would merge … well, it didn’t seem like the grocery consumer would benefit from the result.
Kroger has a City Market store in West Vail and Albertsons has a Safeway market about a stone’s throw away. You can shop exclusively at one or the other. Or you can compare prices between the two stores — and then purchase your items from the less expensive market. One also might carry specific goods that the other does not. Comparative shopping may not be in everyone’s wheelhouse but it does offer a choice as far as product and price.
When the two food giants announced that the acquisition of Albertsons by Kroger would benefit consumers by ultimately lowering prices … hmmm, that seemed like a bit of a stretch. Or smoke and mirrors. Their rationale hinged on the presumption that by merging into one massive grocery conglomerate they could lower prices and would be able to compete with the Costcos and Walmarts of the world.
Generally, mergers of giant corporations have not been particularly helpful for consumers. And the proposed $24.6 billion merger of two major grocery chains did not guarantee that consumers would in any way benefit from the meshing of the companies. Overall, the combined chains would have created a $200 billion company with about 5,000 stores. And, in the process, could have lessened — rather than increased — competition in the food aisles.
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The Federal Trade Commission stepped into the fray and challenged the merger, arguing that consolidating the two companies would create a potential loss of competition. The FTC also argued that the promise to lower prices could not be legally enforced and that, with a lack of competition, prices could instead be raised.
A couple of days ago, in separate decisions, a federal judge and a Washington state judge appeared to agree with the FTC and blocked the merger. The federal judge, Adrienne Nelson, said that the two grocery entities currently “engage in substantial head-to-head competition and the proposed merger would remove that competition.” The state judge issued a similar opinion.
So the merger appeared to be in jeopardy.
And then, in an ironic twist, the two grocery companies immediately turned on one another.
Albertsons pulled out of the merger and each company accused the other of not doing enough to push the deal through. Albertsons also filed a lawsuit against Kroger, asking for $600 million in termination fees and billions in legal fees. Kroger, meanwhile, called Albertsons’ claims baseless and said it will fight them in court.
So much for the consumer advocacy that both companies had touted when they were playing nice with each other.
The proposed merger has now turned into a soap opera on aisle seven.
And no soap, regardless of brand, is strong enough to clean up this mess.
