Albertsons Is Mad at Kroger
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Imagine how you would solve this problem from first principles. It is October 2022, and two big supermarket companies, Albertsons Cos. and Kroger Co., are discussing a merger. Both companies feel the need to get bigger to compete with Walmart, Target, Costco and Amazon, and this seems like a logical combination. Kroger is the bigger company, with roughly twice as much revenue, so naturally Kroger will buy Albertsons for cash.
There is a problem. The problem is that the US Federal Trade Commission, in 2022, is skeptical of big mergers, and this would be a big merger. In particular, Kroger and Albertsons supermarkets compete with each other in many areas, and a merger could undermine that competition and lead to higher prices. If a Kroger is across the street from an Albertsons, competition with the Albertsons will keep the Kroger’s prices low, but if those two supermarkets are owned by the same company there will be nothing to stop them from raising prices.1 A merged Albertsons and Kroger would compete better against Walmart, but worse against each other, and the FTC is going to focus on that reduced competition.