Daily Bread

So where I live, in a quiet section of the Seattle suburbs, there are a number of different places where one can buy groceries and the like. There is Whole Foods, Trader Joe's, Target, Costco (although Costco really isn't a grocery store),  Safeway, Albertsons, Haggen, Quality Food Centers (QFC) and Fred Meyer. Expand the radius out farther, and you'll find Wal Mart, Win Co, PCC, Grocery Outlet and some other independent stores.

QFC and Fred Meyer are both owned by the Kroger Company, the largest supermarket operator in the United States. Safeway, Albertsons and Haggen are all owned by Albertsons Companies, Incorporated, which is the second largest. And now they want to merge. Supposedly to retain their ability to compete against their smaller rivals. In order to appease regulators, the combined chain has promised to sell off a few hundred of its stores. This is nothing new. When Albertsons and Safeway merged back in 2015, they divested a number of stores. It went poorly. The American Antitrust Institute noted, according to the National Law Review, that "several stores were sold to an untested rival that could not maintain them, and, ultimately, most of these stores were shuttered or reacquired by Albertsons." That "untested rival" was Comvest Partners, a private-equity firm out of Florida, which had purchased Haggen. Under Comvest, the newly-expanded Haggen foundered badly, and, less than a year later, went into bankruptcy. Which is how Haggen came to be owned by Albertsons.

Thus did a divestiture, mandated by the Federal Trade Commission as a means to maintain competition, result in even further consolidation of the local grocery industry.

I bring all of this up because of the list which with I started off this post. While there are about a dozen names on the list, the Albertsons and Kroger-owned stores are the lion's share. Generally speaking, the "neighborhood grocery store" is going to be one of those. The two nearest stores to me are both Safeways. And that means that, more than likely, this is going to be an area where the combined company sells or closes stores. Amazon might purchase some of them, to add to it's grocery holdings. Whole Foods, however, is already a pricier and lower quality shopping experience than it had been earlier.

And the uncertainty over what is going to happen is beginning to worry people. Grocery workers are worried for their jobs. Neighborhoods are concerned about their access to grocery stores in their local areas; Albertsons kept leases on some shuttered stores, and entered into restrictive covenants on others to prevent other grocers from moving in. One neighborhood in Bellingham won't be able to use a former Albertsons location for another grocery store until 2038.

Given how thoroughly the FTC allowed the last merger to go sideways, I'm expecting that this one, if it goes through, will also be a disaster for many people. If the FTC didn't think to explicitly disallow openly anti-competitive practices like extending the leases on closed locations to prevent other companies from operating in areas vacated by the merged company last time, it seems likely that they'll miss something that turns out to be important this time as well.

And the ideas that the nation's number one and two grocery chains are merging to a) preserve their ability to stay competitive and b) provide better value to customers seem like a child saying that they really, really, need to have whatever it is they saw in a store and that they promise to be good if they're allowed to have it. It doesn't take a degree in child development to understand that they're saying what they think people want to hear.

In any event, I will admit to a morbid curiosity to see just how badly everything goes. Companies in the United States have a habit of putting metaphorical guns to the public's head whenever they want something. Accordingly, I suspect that even Chairwoman Lina Khan's open criticism (see below) of the earlier merger may not be enough to prevent this one.

The [divestiture] remedy in the Albertsons/Safeway case is arguably even harder to fathom. To allay the FTC’s concerns, the merging entities sold 146 Albertsons stores in towns and cities in the Western United States, where they competed with a Safeway, to a small supermarket chain called Haggen. Following this acquisition, the number of Haggen stores increased from 18 to 164. Even a casual observer could have predicted that Haggen would have great difficulty expanding its storefronts nearly ten-fold in a very short period of time. The skeptics have been proven right. Haggen struggled to integrate the new stores and, despite its reorganization efforts in bankruptcy, may be forced to liquidate. Underscoring how the remedy backfired, Albertsons has reacquired a number of the stores it sold through the bankruptcy process.

(As an aside, as someone who lives in the area, and has shopped at Haggen for most of the time I've been out here, Ms. Khan's statement that "Haggen struggled to integrate the new stores" is putting it very mildly. One would not have been considered foolish at the time to bet that Haggen would simply fold.)