Did someone forward you this newsletter? Is Food & Power landing in your spam? Try adding [email protected] to your contacts. Photo courtesy of iStock. Why Albertsons and Kroger's Spinoff Deal Won’t Work.One year after Kroger and Albertsons announced plans to merge, antitrust enforcers have yet to approve or challenge the deal. But that could be about to change. Last week, the California Attorney General Rob Bonta said his office is considering filing a suit against the merger. “Right now, there’s not a lot of reason not to sue,” he told reporters last Thursday. Meanwhile, sources told both Supermarket News and Axios that the Federal Trade Commission is also seriously weighing a challenge. This is despite Albertsons and Kroger's latest attempt to “litigate the fix” or preemptively resolve competition concerns by selling off over 400 stores to C&S Wholesale. Enforcers should be skeptical of Albertsons and Kroger's proposed spinoff. Divestiture remedies rely on the assumption that the new buyer, in this case C&S Wholesale, can successfully operate its new stores to maintain vigorous competition. But there’s a lot of reasons to doubt that C&S can pull this off. Wholesalers historically haven’t made the best retailers and C&S only recently started expanding into grocery stores after losing some big wholesale customers. It’s also not clear if C&S will acquire some of Kroger and Albertsons valuable customer data necessary to run the stores. The last time Albertsons sold off hundreds of stores to buy a big competitor, it allegedly withheld critical information from new managers and ransacked stores of valuable shelf-stable goods. Even if the divested stores manage to stay open, a combined Kroger-Albertsons would still amass enough market power to squeeze suppliers. Further, Albertsons's private equity owners, Cerberus, would be rewarded for bankrupting and rolling up another industry. Grocery workers would lose bargaining power to one larger employer and though C&S has promised to honor union contracts, it has a history of shifting its workload from union warehouses to its non-union shops. For a full analysis of this dicey deal and more on private equity meddling in groceries and the flaws with sell-offs as a merger remedy, read Claire Kelloway and Maureen Tkacik’s article in The American Prospect. What We're Reading
About the Open Markets InstituteThe Open Markets Institute promotes political, industrial, economic, and environmental resilience. We do so by documenting and clarifying the dangers of extreme consolidation, and by fostering discussions of ways to reestablish America’s political economy on a more stable and fair foundation. Follow F&P on Twitter | Subscribe to this Newsletter | F&P Website | Contact Us |