March 4, 2024

More On FTC Challenges Kroger-Albertsons Deal: New Merger Guidelines Applied

Last week, John blogged about the FTC’s challenge of Kroger’s proposed acquisition of Albertsons — and specifically, the FTC’s criticism of the divestiture plan the parties devised to address antitrust concerns. As John noted, courts are sometimes more sympathetic to these plans.

This Freshfields blog on the lawsuit notes that the lawsuit also gives some insight into the FTC’s enforcement strategy under the 2023 Merger Guidelines — since this is the agency’s first attempt to block a merger since their publication. Specifically, the lawsuit “relies on the new thresholds to allege that the Kroger/Albertsons transaction is presumptively unlawful.”  It also points to the reduction of competition in the labor market and “is the first challenge that does not allege that workers need to be highly specialized in a particular field but instead puts the focus on union membership.” Here’s more from the blog:

The FTC’s approach to the labor theory of harm is a novel one in modern merger enforcement under Section 7 of the Clayton Act. One likely issue to resolve is whether the markets are appropriately defined for antitrust purposes. For example, in an area where workers may not need to have highly specialized training or experience, there is a question whether businesses operating in different industries compete for the same workers—that is, could a clothing retailer or a restaurant hire a worker from a grocery store?

The complaint attempts to define the labor market by arguing that union grocery workers have incentives to keep their pension and healthcare benefits by staying within the union. Regardless of any potential judicial outcome, these allegations demonstrate that the FTC remains focused on labor markets, including in merger control.

The blog suggests that “merging parties should consider whether there are any potential labor-focused competitive concerns in a given transaction, especially in circumstances where there are stakeholders that may complain, such as unions.”

Meredith Ervine