Giant Corporate Mergers Hurt Both Workers And Consumers

The following post is part of one written by Robert Reich:

Last week, in a court in Oregon, the Federal Trade Commission began to rein in two giant runaway grocery chains — Kroger and Albertsons — that want to merge into the biggest grocery combination in history and gallop away with your money and many workers’ wages.

 

It’s the first time anti-monopoly law has been used both to tame consumer prices and help workers gain better wages. The case illustrates how the Biden-Harris administration is seeking to restructure the economy for the common good — and what the Harris-Walz administration will, hopefully, have the opportunity to do even more of. 

Three arguments undergird the FTC’s case:

(1)  Grocery prices are already through the roof, in part because there’s not sufficient competition in most local grocery markets to force chains to lower their prices. Kroger and Albertsons are the two biggest grocery chains in America. If they’re allowed to merge, the combined company, plus Walmart, will control 70 percent of the grocery market in over 150 cities. That means even higher prices. 

(2) The proposed $24.6 billion merger would not only put 5,000 American grocery stores under one corporation. It would put 41 retail grocery brands and 4,000 pharmacies under the same corporation. It would signal to every other industry they can make big profits by further monopolizing.

(3) If allowed to combine, Kroger and Albertsons would also put their combined 700,000 workers under one corporation. These workers would then have to bargain with just one take-it-or-leave-it giant grocery chain. This would erode their bargaining power, leading to lower wages, worse benefits, and weaker worker protections. 

This last point — the relationship between corporate concentration and lower wages and benefits — is almost never raised in antitrust litigation yet it’s hugely important for understanding the current structure of the American economy and why so many American workers justifiably feel shafted. 

Since the late 19th century, the U.S. government has been deciding the extent to which corporations can join together to gain market power, and workers can join together in labor unions to gain bargaining power. This balance of power has had as much effect on prices and wages as supply and demand — in fact, it undergirds supply and demand.

 

In 1890 and then again in 1914, the United States enacted anti-monopoly laws. Teddy Roosevelt and Woodrow Wilson were fierce trust-busters. In 1935, FDR signed into law the National Labor Relations Act, which allowed workers to form labor unions and required employers to negotiate in good faith with those unions. 

By 1950, big business and big labor were in rough balance. That balance of power was central to the growth of both the American economy and the American middle class. It fostered a basic bargain: As corporations became more profitable, their workers did, too. . . .

Over the last 40 years, though, union power has dropped precipitously while corporate power has soared. The result has been near-record levels of inequality (see chart, above). 

In 1955, over a third of all workers in the private sector were unionized, which gave them considerable bargaining power to get higher wages. (Employers whose workers weren’t unionized often offered their workers almost the same wages and benefits as those in the unionized sector, to fend off unionization.)

Now, only 6 percent of private sector workers are unionized. 

Meanwhile, over just the last two decades, more than 75 percent of U.S. industries have become more concentrated.

Four beef packers now control over 80 percent of their market, domestic air travel is now dominated by four airlines, and many Americans have only one choice of reliable broadband provider. Just four companies — Walmart, Costco, Kroger, and Albertsons — dominate the grocery industry. 

When few workers are unionized, wages remain stagnant or decline. Without adequate competition, prices and corporate profits rise. The result: Wealth is siphoned off from workers and consumers to large corporations and shareholders. . . .

The Biden-Harris administration has made a good start at reining in corporate power and strengthening worker power. Stopping the Kroger-Albertsons merger is an important step along the way. 

Here’s hoping the Harris-Walz administration will take many more such steps.