PROTECTING COMPETITORS DOES NOT PROTECT COMPETITION.

The Federal Trade Commission, in all its majesty, seems bent on resurrecting the structure-conduct-performance paradigm only with new actors.  Not too long ago, the Jarrett regency's appointees blocked a merger of Albertsons with Kroger, to the predictable hallelujahs from Common Dreams types.

Antitrust advocates on Tuesday welcomed a pair of court rulings against the proposed merger of grocery giants Kroger and Albertsons, which was challenged by Federal Trade Commission Chair Lina Khan and multiple state attorneys general.

"The FTC, along with our state partners, scored a major victory for the American people, successfully blocking Kroger's acquisition of Albertsons, "said Henry Liu, director of the commission's Bureau of Competition, in a statement. "This historic win protects millions of Americans across the country from higher prices for essential groceries—from milk, to bread, to eggs—ultimately allowing consumers to keep more money in their pockets."

"This victory has a direct, tangible impact on the lives of millions of Americans who shop at Kroger or Albertsons-owned grocery stores for their everyday needs, whether that's a Fry's in Arizona, a Vons in Southern California, or a Jewel-Osco in Illinois," he added. "This is also a victory for thousands of hardworking union employees, protecting their hard-earned paychecks by ensuring Kroger and Albertsons continue to compete for workers through higher wages, better benefits, and improved working conditions."

I'm not sure which price scissors are at work in order that Kroger and Albertsons simultaneously compete wages up and grocery prices down.  The genealogy of Albertsons suggests things might not be that easy.  Direct your attention, dear reader, to that "Vons in Southern California."  Years ago, Vons attempted a merger with another Southern California grocer called Shopping Bag.

In the 1950s, competition in the Los Angeles grocery market intensified. Small grocers were acquired by large companies, and large companies greatly increased their numbers of stores in the city. From 1948 to 1958, for example, the number of stores owned by Von’s Grocery Co. (Von’s) (defendant) increased from 14 to 27. Shopping Bag Food Stores (Shopping Bag), which competed with Von’s, increased its number of stores from 15 to 34. Together, Von’s and Shopping Bag controlled 7.5 percent of the grocery market. In 1960 Von’s acquired Shopping Bag by purchasing all its stock and assets. The United States government (plaintiff) sued Von’s, alleging that its acquisition of Shopping Bag violated § 7 of the Clayton Act. The government argued that the acquisition was likely to worsen the trend of large grocers obtaining greater market share to the detriment of small grocers. The government sought a temporary restraining order, which the district court denied. Eventually, the district court held that the acquisition did not violate § 7 because there was not a reasonable probability that it would create a monopoly or substantially lessen competition. The United States Supreme Court granted certiorari.

I take issue with that "competition intensified" passage.  It changed in form, with sole proprietorship grocers served by Commission Row distributors or jobbers being replaced by vertically integrated grocery chains that organized their own logistics.  To the Supreme Court of the era, the disappearance of the sole proprietors and the combinations into chains were the substantial lessening of competition the authors of the Clayton Antitrust Act had in mind.

Held. The merger of two of the largest and most successful retail grocery companies in a market area characterized by a steady decline, before and after the merger, in the number of small grocery companies, combined with significant absorption of small firms by larger ones, is a violation of § 7 of the Clayton Act. Pp. 384 U. S. 274-279.

(a) By the enactment of the Celler-Kefauver amendment to § 7 in 1950, Congress sought to preserve competition among small businesses by halting a trend toward concentration in its incipiency, and, thus, the courts must be alert to protect competition against increasing concentration through mergers especially where concentration is gaining momentum in the market. Pp. 384 U. S. 276-277.

(b) This case presents the precise situation which Congress intended to proscribe, where two powerful companies merge to become more powerful in a market exhibiting a marked trend toward concentration. Pp. 384 U. S. 277-278.

(c) Section 7 requires not only an appraisal of the immediate impact of the merger on competition, but a prediction of the merger's effect on competitive conditions in the future, to prevent the destruction of competition. United States v. Philadelphia Nat. Bank, 374 U. S. 321, 374 U. S. 362. P. 384 U. S. 278

(d) Since the appellees were on notice of the antitrust charge, the judgment is reversed, and the District Court is directed to order divestiture without delay. P. 384 U. S. 279.

233 F. Supp. 976, reversed.

Page 384 U. S. 271

Forty or so years ago, economists, particularly those of the creative-destruction-competition-is-discovery school scorned the Court's analysis as missing, completely, the irrelevance of those sole proprietor groceries to the real action, which was the emerging supermarket chains.  Where Vons and Shopping Bag were relatively minor players compared with Safeway.  And yes, a previous generation of structure-conduct-performance economists raised precisely the same objections to Safeway that they raise today about Wal-Mart.

[Once upon a time] there was a middle-class-friendly economy in which large manufacturing firms produced goods in unionized factories. Wal-Mart is the leading edge of a proletarianized economy in which large retailers squeeze those manufacturers while doing everything possible to drive down wages. Tapped's Ezra Klein spells out those behaviors in more detail.

Perhaps I'm showing my age, but at one time the populist political economy saw those large manufacturing firms as building blocks of a monopoly capitalism that practiced conscious parallelism, which reduced efficiency by restricting output and raising prices, and the unions as accomplice residual claimants to the monopoly profits thereby obtained. The retailers of the era were complicit in that monopoly capitalism, with a concentrated food packing industry and often vertically integrated supermarkets profiting by the inflated price of bread, although, again, food and commercial workers' unions participated as residual claimants. Because firms could practice conscious parallelism without calendars to keep track of the phases of the moon or meetings in the back room at Dirty Helen's, antitrust action could do nothing about the resulting inefficiencies, although Wal-Mart could.

But when Wal-Mart goes after those inefficiencies, that's bad. Mr Klein summarizes in a few sentences what several chapters of the book spell out in more detail.

What's funny about the case at hand today is what happened to yesteryear's Wal-Mart.  Safeway are (checks notes) an Albertson affiliate, part of one of those vertically integrated grocery chains I alluded to at the start of this post.  "We support our stores with 22 distribution centers and 19 manufacturing plants."

Funnier still is the reaction of the Common Dreams types to the postponement of the merger.

Advocacy groups applauding the decisions also pointed to the high cost of groceries and the anticipated impact of Kroger buying Albertsons—a $24.6 billion deal first announced in October 2022.

"American families are the big winner today, thanks to the Federal Trade Commission. The only people who stood to gain from the potential merger between Albertsons and Kroger were their wealthy executives and investors," asserted Liz Zelnick of Accountable.US. "The rest of us are letting out a huge sigh of relief knowing today's victory is good news for competitive prices and consumer access."

Describing the federal decision as "a victory for commonsense antitrust enforcement that puts people ahead of corporations," Food & Water Watch senior food policy analyst Rebecca Wolf also pointed out that "persistently high food prices are hitting Americans hard, and a Kroger-Albertsons mega-merger would have only made it worse."

"Already, a handful of huge corporations' stranglehold on our food system means that consumers are paying too much for too little choice in supermarkets, workers are earning too little, and farmers and ranchers cannot get fair prices for their crops and livestock," she noted. "Today's decision and strengthened FTC merger guidelines help change the calculus."

Like Wolf, Farm Action president and co-founder Angela Huffman similarly highlighted that "while industry consolidation increases prices for consumers and harms workers, grocery mergers also have a devastating impact on farmers and ranchers."

"When grocery stores consolidate, farmers have even fewer options for where to sell their products, and the chances of them receiving a fair price for their goods are diminished further," Huffman explained. "Today's ruling is a win for farmers, workers, and consumers alike."

I've had fun mocking that sort of thinking for years, and perhaps those farmers have more, rather than fewer, opportunities to negotiate prices if Wal-Mart have competition at scale.  "What's the over-under on some of the same people who like to slag on Walmart for selling stuff more cheaply using the existing logistics channels either slagging on Walmart for price-gouging because their stuff is getting to the shelves while the competitors' stuff isn't, or slagging on Walmart for attempting to monopolize by chartering those ships? Yeah, I know, that's intellectually inconsistent, but when did the self-styled consumer advocates ever place a premium on consistency?"

But it's getting close to suppertime, and perhaps an illustration of choice is worth those many words.

Skyline chili, four way, before I sprinkle on the pepper sauce.  At Cold Spring Shops headquarters, we don't go all-out on the cheese the way the restaurants do.  One secret is to get your own block of cheese, so as to be able to make longer strands by hand.

Its relevance to today's post, besides getting people thinking about supper, is that Cincinnati-based Kroger carry the chili sauce at their outlets, whether the Kroger in Ottawa, Illinois, or the Metro Mart in Green Bay.  Albertson affilate Jewel do not stock it in DeKalb.  Perhaps that would change, expanding my chili consumption opportunities, with the merger.

Reason's Jack Nicastro gets it.

Even if they merge, Kroger and Albertsons would still only account for 9 percent of overall grocery sales, as C. Jarrett Dieterle has noted in Reason, belying the FTC's concerns that the merger would grant them significant market power. The FTC's overly narrow definition of the grocery market is the actual cause of concern: The Commission's definition includes traditional supermarkets and "hypermarkets" like Walmart and Target, but excludes Amazon and Costco, the second and third largest grocery retailers, respectively.

Considering Kroger's and Albertsons' single-digit shares of the properly defined market, and competition from other grocers not recognized by the FTC, the merger was more likely to save Albertsons from insolvency, not afford them enough market power to increase prices. Kroger and Albertsons projected the merger would create $500 million in cost savings—at least some of which would be passed onto consumers. The pair also planned to invest $1.3 billion to improve customer service, according to Nate Scherer, a policy analyst with the American Consumer Institute, a nonprofit research institute dedicated to the promotion of consumer welfare.

Perhaps, though, in the same way that Cleveland-Cliffs might be the hidden beneficiary of the Jarrett regency's hostility to Nippon Steel, Jeff Bezos's Amazon or Hillary Clinton's Walmart might be the hidden beneficiary of this resurrection of the zombie "industrial concentration" monster.

The FTC's prevention of the Kroger-Albertsons merger will not benefit consumers, but protect larger and more entrenched grocers. Instead of miring retail grocers in expensive legal costs, the FTC should've taken into account the plethora of nonretail grocers competing with Kroger, Albertsons, and recognized that their merger would have been pro-competitive.

Alternatively, perhaps the commissioners might have thought more carefully about nationwide availability of goods.  Isn't it less sustainable, to use a buzzword the sophomores running Dementia Joe's electronic pen and his 'phone are in love with, for a shopper in DeKalb to make a run to Kroger in Ottawa or have that Skyline shipped in by Amazon than to have the Kroger warehouse include it in the next trailer headed to the local Jewel?