When grocery giants merge, consumers benefit

A merger would allow the new grocery firm to keep prices down for consumers

The announcement that grocery giant Kroger intends to buy rival Albertsons is already provoking speculation that the Federal Trade Commission will try to block the deal. Their likely theory, based on antiquated concepts of how business operates, is that consumers would suffer from decreased competition and increased prices. 

This would be a complete misreading of the situation. The merger is necessary because of increased competition and will enable the merged firm to keep prices down, for the benefit of consumers.

The grocery business is continually changing and existing firms have to adapt or die. New entrants into the market like the German chains Aldi and Lidl compete primarily on price. Amazon’s acquisition of Whole Foods has allowed that chain, which competed on quality, to scale up its operations quickly. 


Grocery store giant Kroger intends to buy its rival Albertsons. (Stephen Zenner/SOPA Images/LightRocket via Getty Images / Getty Images)

Regional chains like Publix expanding into new markets bring other pressures. Walmart, of course, remains the market leader and is constantly innovating. The pandemic also changed shopping habits.


That means that simply being the second-biggest grocery chain like Kroger is (Kroger owns Harris Teeter, Dillons and Ralphs) isn’t enough. 

Like the Red Queen in Lewis Carroll’s "Through the Looking Glass," businesses in this sector have to keep running just to stay in the same place. That in turn means that mergers are an important business strategy. By merging, you can achieve economies of scale and improve efficiency.

Most importantly, it allows the merged firm to continue to compete on price – in other words, to keep prices down.

Shoppers enter grocery store

Shoppers enter the Harris Teeter in the Navy Yard neighborhood of Washington, D.C. (Fox News Digital/Jon Michael Raasch / Fox News)

This is completely the opposite of what our antitrust regulators seem to think happens. They live in a weird late 19th-century world where competition was much more difficult and local fat cats would occasionally buy a competitor out to reduce choice and increase prices for their captive markets. This hasn’t been the case for a hundred years.

More often, antitrust laws were used to stop innovative companies from out-competing older, less efficient incumbents. In the 1930s, grocery chain A&P used its efficiencies to bring down prices by undercutting competitors. The New Deal Congress reacted by passing the Wholesale Grocer’s Protection Act, now known as the Robinson-Patman Act, to stop such "price discrimination." Consumers suffered at a time when they could have most benefited from lower prices.


This weird world of law protecting firms rather than households was thankfully swept away after the late Judge Robert Bork’s careful investigation into the fundamental meaning and purpose of the vague antitrust laws passed in the late 19th and early 20th centuries. He found that the purpose of the laws, as expressed by their drafters and in debates in Congress, was to protect consumer welfare, not to protect competitors, and certainly not to restrict innovation. The courts agreed, and interpreted antitrust law on this basis.

FTC building

The Federal Trade Commission building in Washington, D.C. (Paul J. Richardson/AFP via Getty Images / Getty Images)

Yet everything old is new again, and a new breed of regulators like the FTC’s Lina Khan and the Department of Justice’s Jonathan Kanter want us to go back to that old model on the theory that large companies must be bad for the economy, even if prices are low. That’s why I expect Khan to attempt to stop this merger. Her fellow FTC commissioner, Alvaro Bedoya, has even talked about reviving the Robinson-Patman Act.


If they succeed it will be a disaster for consumers. With the continued threats of snarled supply chains, inflation and recession, companies need to be able to adapt to keep delivering the best options for consumers to choose from. How companies configure and manage themselves is part of that adaptation process, and mergers have to be an allowed component. 

Rather than letting bureaucrats interfere, we should cheer that sort of experimentation and reject the political opportunism that would control or direct how private capital reacts to a changing world.