One of the foundational theories of capitalism is that competition is beneficial.
Competing retailers and manufacturers must constantly strive to improve their service, products and prices in order to attract and retain customers. At the same time, they must offer adequate wages and benefits in order to attract and retain qualified workers.
As a policy paper issued by the Biden administration in 2021 states: “When there is insufficient competition, dominant firms can use their market power to charge higher prices, offer decreased quality, and block potential competitors from entering the market — meaning entrepreneurs and small businesses cannot participate on a level playing field and new ideas cannot become new goods and services.”
Because of that, a proposed $25 billion merger between Kroger and Albertsons — the nation’s largest grocery store chains — is disconcerting. Albertsons owns Safeway, and Kroger owns Fred Meyer and QFC. Between them the companies operate 330 stores in Washington, including 21 in Clark County.
While there are plenty of Walmart and WinCo and Costco outlets, along with higher-end stores such as Chuck’s Produce and Trader Joe’s and Whole Foods, most neighborhood grocery outlets fall under the Albertsons or Kroger brand — even if the name on the front of the store says otherwise.
The companies hope to complete the merger early next year, and the proposal is being reviewed by the Federal Trade Commission. And while it could be viewed as simply a business decision between two large corporations, it has broad implications.
A study from the University of Utah claims “that increased labor market concentration will worsen pay and job quality, that a reduction in the flow of job offers resulting from the merger will limit any leverage low-wage workers have to obtain better job quality, and that concentrating employers at the bargaining table in a labor market where terms and conditions are set by collective bargaining agreement will deprive the union representing those workers of leverage.”
A statement from Kroger counters that “workers gain from $1 billion in higher wages, expanded benefits, long-term job security, and a strong unionized workforce. The merger will also mean lower prices and more choices for fresh food for customers and more investments in our communities.”
Such assertions defy centuries of economic theory ranging from Adam Smith to Paul Krugman. It is understandable that Kroger and Albertsons would seek leverage in competing against nonunion outlets such as Walmart, but it is insulting that officials would claim the merger will benefit workers.
It also is difficult to see how a merger would benefit consumers. Combining operations would incentivize the company to shutter outlets, increasing the likelihood of food deserts in Clark County and limiting choices for shoppers.
All of this reflects vast changes in the American economy. Triggered by Ronald Reagan’s push for deregulation, the means of production have been increasingly consolidated through mergers, making it more difficult for smaller companies to compete. This trend sometimes benefits workers and consumers; it always benefits stockholders and has greatly contributed to decades of growing wealth inequity in this nation.
While theorists can debate the complexities that would result from a Kroger-Albertsons merger, the underlying issue remains rather simple: It would undermine the competition that creates market efficiencies and drives our system of capitalism.
