Grocery store giants Kroger and Albertsons have announced a proposed merger, but it’s a business combination that will likely come under undue antitrust scrutiny. Before the federal government and its Federal Trade Commission and/or Department of Justice open their big mouths in opposition, we should get a few things straight about mergers and government intervention.
The glaring problem with big government intervention is hypocrisy. The federal government boasts of being the largest purchaser on Earth as well as the largest employer in the United States. Given its debt-fueled spending, massive contracting and procurement and hiring heft backed up by unprecedented new legislation aimed specifically at federal consolidation, the only monopoly and monosony power to worry about is that of the federal government itself, throwing its weight around on ridiculous white elephant projects like federally funded electric vehicle (EV) charging station networks, the C&O canals, and contaminated lead pipes.
To see the arrogance on display in defense of their interventions, look no further than a joint press conference between Joe Biden and Attorney General Merrick Garland on Jan. 3, 2022, throwing punches at industries across the economy in service of Biden’s “Competition Policy” executive order aimed at consolidating federal monopoly power. Remember also the appalling calls for anti-market collusion between business and government by Biden and Vice President Kamala Harris at the Summit of the Americas, as well as the threatening deliberations of the so-called White House Competition Council.
A supermarket merger is not a threat to humanity. Federal consolidations underway are the real risks to the American economy and competition, so much so that it is private ventures that should be shielded from government antitrust predators.
Besides hypocrisy, another problem with government antitrust intervention is a fundamental lack of understanding about competition itself. There is far more to competition than the number of competitors in an industry or industry concentration. A small number of firms can still mean healthy competition (especially in comparison to Biden’s fusion of business and government across the economy from which there is no protection).
When firms like grocery giants merge, sure, the number of competitors in that line of business declines, at least temporarily. But firms that join forces to create a large market share may also generate cost efficiencies that outweigh any decline in their output. What if what we need most to grow the infrastructure needed to super-charge economic opportunity for all is vastly larger private firms than what exist now? Imagine, for example, the resources it would take to realize space commercialization.
Meanwhile, if Kroger and Albertsons merge, their competitors will respond in dynamic ways. Merger actions do not occur in a vacuum; they inspire a competitive response. Antitrust’s cardinal sin is that it eliminates a need for competitors to do anything to improve products and services.
Another thing government types don’t grasp is that merged companies can mean more resources to launch new output or lines of business. Will that happen? The only way to know is to try and see. To prevent such efforts is to also harm consumers.
Current merger guidelines claim to take dynamic efficiency effects into account, particularly when those effects cannot be achieved except by merging, but that’s just on paper. In reality, this sort of “mother-may-I” stance inflicted on the private sector does more to impede than help mergers. Meanwhile, federal projects, spending, and regulation steamroll right ahead without antitrust concerns.
That is not to say that all mergers succeed. If the promised cost savings from a Kroger-Albertsons merger do not materialize, that’s a market reality that will certainly be revealed to all of us, and in real time.
And even if a particular merger doesn’t make society better off, the most fundamental question should be: whose output is restricted by a merger? In a market economy, producers are free to associate and are not forced to part with their goods on unfavorable terms. Those fundamental property rights — a foundational notion at odds with both old-school antitrust philosophy and the new Biden-progressive “whole-of-government” interventions — do not conflict with social welfare but are essential to it. Consumer benefits require the dynamism that both rivalry and strategic combinations deliver.
Speaking of rivals, always be suspicious of objections coming from direct competitors of merging firms, which are a tip-off to a merger’s efficiency rather than its anti-competitive effects. A merger expected by competitors to generate higher consumer prices — which is what a monopoly allegedly does, after all — would benefit those competitors: they could sell more at existing or even higher prices while undercutting the new monopoly.
Also beware of antitrust authorities trying to extract concessions from merging companies, targeting particular high-visibility mergers and prying into the firms’ operations well beyond the time of the merger. Time will tell on this new proposed venture, but wringing out onerous consent decrees places burdens on market processes, injecting the government into an industry as a potentially permanent, unwanted “partner.” That has a dampening effect on companies that want to even consider merging.
Instead of Washington butting into every big merger, we should be returning to a system that lets the market, shareholders, and consumers decide the appropriateness of mergers.
Clyde Wayne Crews, Jr. is a senior fellow at the Competitive Enterprise Institute and author of a report on The Case against Antitrust Law.