Five Problems with a Potential FTC Challenge to the Kroger/Albertsons Merger

In October 2022, Kroger and Albertsons announced their intent to merge the two companies in a deal valued at $24.6 billion. The combined company would be the third largest food and grocery retailer, behind Walmart and Amazon. Based on the Federal Trade Commission’s recently release draft merger guidelines, and comments by FTC chair Lina Khan, it likely the agency will move to block the merger—even if the companies offer to spin off stores to competing chains. The FTC will face an uphill battle. Kroger’s CEO has indicated the company is “committed to litigate” if the agency attempts to block the merger. The agency has already lost several notable uphill battles and economic reality may not be on the regulator’s side. For decades, the FTC has clung to a narrow definition of supermarkets to traditional food and grocery, but excludes warehouse clubs and e-commerce. The world has changed, and so should the FTC’s market definition. An attempt to block the merger on labor market concerns will be doomed to fail. The retail labor market is extremely competitive, and workers have a wide range of alternative employment options—both in and out of the retail sector. At the same time, both Kroger and Albertsons are highly unionized, providing a counterbalance to any potential exercise of monopsony power by the merged firm. The FTC has traditionally seen divestitures as an appropriate and adequate remedy for any competitive concerns in local markets. FTC Chair Lina Khan has signaled her disdain for divestitures. This may be a key area in which the FTC’s desires are rebuffed by the courts