The International Center for Law & Economics recently posted a story entitled “Five Problems with a Potential FTC Challenge to the Kroger/Albertsons Merger,” in which the authors took a critical look at expected objections that the Federal Trade Commission might raise to the proposed $24.6 billion deal.
The piece concedes the FTC’s “increasingly aggressive enforcement stance against mergers and acquisitions,” but suggests that “attempting to block this transaction would go against the analytical framework the FTC has historically used to evaluate similar transactions, as well as the agency’s historical precedent of accepting divestures as a remedy to address localized problems where they arise.
“Such breaks with the past sometimes happen; our understanding of the law and economics evolves. Unfortunately, these likely breaks from tradition would reflect a failure to consider relevant and significant changes in how consumers shop for food and groceries in today’s world.”
The analysis posits that the FTC is trying to remake U.S. merger law by stretching existing legislation in new directions, but argues that the effort “is likely to falter before the courts, but not before imposing a substantial tax on all corporate transactions – and, ultimately, on consumers.”
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.
It is a fascinating analysis that probably reflects a lot of the thinking that Kroger and Albertsons lawyers will bring to any engagement with the FTC, and you can read the report in its entirety here.
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