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February 28, 2024

Breakingviews: Stephen King ghost-writes trustbusting bestseller

by Breakingviews.

What do butchers and authors have in common? To listen to American trustbusters, both are integral to the fight against corporate consolidation. The U.S. Federal Trade Commission, led by Lina Khan, on Monday sued to block the mega-merger of supermarket chains Kroger and Albertsons. Zeroing in on the anticipated damage to workers could produce the agency’s own bestseller.

There are more conventional reasons to be skeptical about the $25 billion deal unveiled in October 2022. For one thing, such combinations typically require offloading locations where there is overlap. Kroger played ball, agreeing to sell 413 stores to C&S Wholesale Grocers. The FTC charges, however, that a buyer focused on wholesaling won’t work.

Albertsons itself probably helped inform the decision. Its 2015 divestiture of hundreds of grocers to a private equity firm as part of a larger combination with Safeway ended with their new owner going bust a year later. Seeking to avoid a similar outcome makes sense, but the FTC’s analysis also strains credulity by excluding e-commerce giant Amazon.com and dollar stores as competitive forces in groceries. It makes the focus on employees even more important.

Although competition for labor is widespread, collectively bargaining workers can be at a disadvantage. Unionized Kroger staff, for example, cannot play their employer against non-union Walmart. Only by selectively striking at Kroger to pressure Albertsons, or vice versa, do they win pay increases and such. Kroger staffers in areas where they can play multiple counterparties off one another see a 20% bump in earnings, Marshall Steinbaum of the University of Utah has found.

It’s an unconventional approach, but the Department of Justice’s successful lawsuit against Penguin Random House’s attempt to buy Simon & Schuster similarly reasoned that the real harm was to top writers, such as Stephen King, rather than consumers. Publishers have too much power when negotiating for highly anticipated books. They command the biggest upfront payments and smaller rivals cannot afford them. A judge in 2022 found that this monopsony theory neatly parallels traditional monopoly arguments.

Similarly, the FTC contends that non-union employment is no substitute for a union job’s richer benefits. After years of mixed court rulings on far-flung theories of hypothetical harms, this case raises more concrete concerns for a political constituency the Biden administration cares about. Much more so than the agency’s inconclusive sparring against technology giants, the Albertsons case has a better chance of victory and lasting consequences. For both Khan and acquisitive companies, her supermarket story could become a horror classic.

Context News

The U.S. Federal Trade Commission on Feb. 26 sued to block the $25 billion acquisition of supermarket chain Albertsons by rival Kroger, a deal unveiled in October 2022, arguing that the combination would hurt workers and lead to higher prices for grocery shoppers. Attorneys general from eight states and the District of Columbia signed on to the FTC’s lawsuit in a federal court in Oregon, following separate cases filed in Colorado and Washington.

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