What Kroger-Albertsons Merger Means For Competition, Prices, And The Local Community
Mergers and acquisitions are part of American corporate life. It's a quick way for a corporation to achieve economies of scale and scope, pursue synergies, enter new markets, and compete effectively against industry peers.
Mergers and acquisitions are a good thing for stockholders in the long term, provided that the new entity achieves investment returns that exceed the cost of capital. And it may be a good thing for consumers and labor, too, when some of the efficiency gains from the merger are passed on to these groups.
That is the case in the Kroger-Albertsons merger announced last October. At least according to Kroger leadership.
The new retail giant that would emerge from the merger will realize "the compelling benefits this merger will offer, including enhancing competition, lowering prices for customers, and improving access to fresh food," read a recent company press release. It will create "opportunities to continue investing in our associates and securing the long-term future of union jobs."
But Anat Alon-Beck, a business law professor at Case Western Reserve University, thinks otherwise.
Instead, the merger will create a new giant, which could change the grocery sector in several ways. First, if it goes forward, the merger will create another massive player in the grocery sector with monopoly-like powers, and the grocery retail industry will become further consolidated. And that would change the rules of the game.
"Yes, they theoretically can compete with Amazon or decide in the future to fix prices and compare them to the likes of giants like Amazon," Alon-Beck said in an email to International Business Times.
Secondly, Kroger and Albertsons merger will adversely affect consumers and local communities.
"It will leave the local communities —consumers and workers — worse off," she said. "All you have to do is just look at the recent Safeway example."
Specifically, the merger will increase prices when inflation has already squeezed family budgets.
In addition, it will constrain consumer choices and limit their access in underserved or rural areas, where they need the most protection from predatory practices.
"It will affect the bargaining powers of their employees - will make it harder for them to negotiate good and fair employment terms," Alon-Beck added. "The advantages of the supply chain will make it much harder for independent grocery stores to compete."
For all these reasons, she is doubtful regulators will approve the merger.
"I don't have a crystal ball," Alon-Beck said. "I'm not sure if it will pass. Many regulators are very concerned about these developments. Only time will tell."
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