Yesterday, when writing about an analysis by the International Center for Law & Economics (ICLE) of why the Federal Trade Commission (FTC) might run into problems if it decides to fight the proposed $24.6 billion acquisition of Albertsons by Kroger, I may have tripped over my own paraphrase.
Here’s what I wrote:
“The article also argues that the FTC ought to be considering a marketplace beyond just supermarkets when considering the merger; that a merger will give the combined company monopsony power, when market realities suggest that this is unrealistic; that it is unlikely that suppliers will raise their prices for smaller competitors to make up for the lower prices that they’ll have to give an empowered Kroger-Albertsons; and that proposed divestitures are likely an inadequate and inappropriate remedy.”
I was going to take another crack at that, but decided that I didn’t want to risk screwing it up again. (Should’ve gone to law school, I guess.)
So let me simply quote the two relevant passages from the story:
• “More than in any previous retail merger, opponents of the Kroger/Albertsons deal have raised the specter of potential monopsony power in labor markets. But these concerns reflect a manifestly unrealistic conception of labor-market competition. Fundamentally, the market for labor in the retail sector 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.”
• “Historically, the FTC has allowed most grocery-store transactions to proceed with divestitures, such as Ahold/Delhaize (81 stores), Albertsons/Safeway (168 stores), and Price Chopper/Tops (12 stores). The extent of the remedies sought depends on the extent of post-merger competition in the relevant local markets, as well as the likelihood of significant entry by additional competitors into the relevant markets.
“Despite a long history of divestitures serving as an appropriate and adequate remedy in supermarket mergers, some point to the Albertsons/Safeway merger divestitures to Haggen as evidence that divestitures are no longer an appropriate remedy. But several factors idiosyncratic to Haggen and its acquisition strategy led to the failure of that divestiture, and it does not properly stand for the claim that all supermarket divestitures are doomed. Any divestures associated with the Kroger-Albertsons merger should learn from the Haggen experience, rather than view it as justification to reject reasonable divestiture options that have worked for other mergers.”
Mea culpa, mea culpa, mea maxima culpa.
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