Scripps News: Why does the government interfere with big company mergers?

March 7, 2024

The government has stepped in on multiple big company mergers in recent years.

JetBlue and Spirit Airlines recently called off their merger agreement, weeks after losing a federal antitrust lawsuit.

And the Kroger-Albertsons merger, announced in 2022 with a target date of finalizing early 2024, is now facing legal challenges.

“Historically, the government has tried to, if you will, balance businesses' pursuit of profit with consumers' pursuit of low prices, lots of variety, convenience, et cetera,” said Dan Roccato, a clinical professor of finance at the University of San Diego.

In both cases, the companies argued that merging would allow them to be more efficient and pass on savings to customers.

“After mergers and acquisitions, we create higher monopoly power for one company. And that monopoly power can be misused,” said Kishore Kulkarni, a professor of economics at Metropolitan State University of Denver.

This is what experts say caused the airline merger to fail.

“It looked like it was doomed from the start because the government initially said this will probably limit competition, raise prices at certain airports, something we’re going to look very closely at,” Roccato said.

So what could this mean for the Kroger-Albertsons merger?

The FTC says the $24.6 billion deal would eliminate competition and lead to higher prices for millions of Americans.

Kroger’s brands include Ralphs, King Soopers and Fred Meyer, for example. Some of Albertsons' brands include Safeway and Acme.

The Federal Trade Commission filed a complaint against the $24.6 billion deal, asking a judge to block the merger temporarily. The FTC claims the deal is anticompetitive, and even cited grocery executives as considering this deal a monopoly. 

Yet Kulkarni explained monopolies exist everywhere in our everyday lives. “There are monopoly powers all over. If you look around, utility is a monopoly power, even your garbage pickup company is a monopoly power,” he said.