Pluralistic: 17 Oct 2022 A giant grocery merger will send "inflation" through the roof

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A brightly lit grocery aisle; at its terminus, looming out from behind the frame, is the upper torso and head of Goya's 'Saturn Devouring His Children.' In the foreground is a dancing 'Rich Uncle Pennybags' from the game Monopoly; he is brandishing a grim reaper's scythe and his features are skull-like.

A giant grocery merger will send "inflation" through the roof (permalink)

Sometimes it's hard to know why prices are going up. Between the oil shock, a tight employment market and the climate polycrisis, is it even possible to tell if companies are using the widespread belief in inflation to hike prices? Uh, yeah, as it turns out, we absolutely can.

Yes, it's hard to peer into the minds of executives at large companies and know whether their price hikes are due to greed or necessity. But we don't have to peer into their minds! We can just dial into their investor calls, where top execs of giant companies brag about hiking prices under cover of inflation:

These guys can't help but boast about their price-setting power, whether that's Colgate-Palmolive CEO Noel Wallace boasting that his company is "good at pricing":

Or Procter and Gamble CFO Andre Schulten saying, "We have not seen any material reaction from consumers, so that makes us feel good about our relative position."

The grocery barons are particularly boastful. Here's Kroger CFO Gary Millerchip explaining why higher wholesale costs have not led to an erosion of the company's massive margins: "We’ve been very comfortable with our ability to pass on the increases that we’ve seen at this point, and we would expect that to continue to be the case."

Kroger is about to get a lot more pricing power, because it is merging with Albertsons, a company that already bought Safeway, Haggen, Acme, Jewel Osco, Shaw's, Pavilions, Von's and too many others to fit in here.

But there are some companies Albertsons definitely doesn't own, because they're owned by Kroger: Ralph's, Dillon's, Food 4 Less, Fred Meyer, Harris Teeter, King Soopers, Mariano's, and many more. As David Dayen writes for The American Prospect, "the illusion of choice in supermarkets masks the dominance," and thus the "preposterous" $24.6b merger will produce a price-gouging juggernaut:

The leadership of both companies assure us that they will not use their combined might to raise prices. These are, of course, the same leaders who have been publicly boasting about their ability to raise prices thanks to their existing scale. With five giant companies controlling nearly the entire US grocery market, it's not really a mystery why grocery prices are up 13% in the past year, while eggs are up 30.5%, chicken up 17.2% and coffee up 15.7%:

As Kroger's CEO told his shareholders: "a little bit of inflation is always good in our business" because it lets him raise prices and "customers don’t overly react."

The architects of the deal are the resassuringly named PE giant Cerberus Capital, who stand to make $7b from the merger:

These are the same motherfuckers who bought up local hospital chains, debt-loaded them, and then threatened to shut them down at the start of the pandemic if they didn't get massive, no-strings-attached public subsidies:

Cerberus is also behind Spain's rental affordability crisis, having bought up innumerable buildings and jacked up the rent, while cutting maintenance and evicting the shit out of anyone who complains:

As Dayen writes, this merger turns on a bet: that the FTC will not block it, but rather, rely on the tired, discredited idea of "conduct remedies" – where a the companies undertaking a giga-merger have to pinky swear that they won't abuse their market power. This always requires a monumental act of credulity, but that's doubly true with these companies.

Back in 2015, Albertsons merged with Safeway, and promised that it would lessen its control over groceries in western states by selling off 168 stores, mostly to Haggen, a company that was "woefully underequipped" for such an expansion. Nine months later, Haggen went bankrupt, and Albertsons bought them, along with the dozens of the stores it promised to sell off, at 80% off, turning a massive profit on the scam:

Now, Albertsons is playing Lucy-with-the-football, promising to sell off 100-375 stores as a condition of the Kroger merger. Only an idiot would trust this promise. Luckily, as Dayen writes, FTC Chair Lina Khan is no idiot. She's turned antitrust into a "shooting war" by declaring that the age of rubber-stamped mergers is over:

Fittingly, that age began with manufactured outrage by the business lobby and its priesthood at the University of Chicago School of Economics over United States v. Von's Grocery Co, where a 1966 grocery store merger was thwarted.

Vons became the rallying cry of the pro-monopoly lobby and their cult of low-information voters, the "Benghazi" of its day. To hear them tell it, the insistence that grocery consolidation was bad was a mere superstition, one that made life worse for everyone in service to an incoherent ideology.

But grocery mergers are bad. They produce monopolies who raise prices on the food we need to survive. Today's "inflation" isn't the result of sending out too much covid relief to ordinary people – it's the result of monopolies:

And the lack of capacity:

This day in history (permalink)

#20yrsago Developing world kept down by intellectual property

#20yrsago Open spectrum explained — REALLY well

#15yrsago Logo’s 40th birthday

#15yrsago Law-firm: copyright prohibits “view source” on our page

#10yrsago Universal Computer Users

#10yrsago Gary McKinnon on the decision not to extradite him to the USA

#5yrsago Stephen Fry’s lecture on a hopeful, cautious, excited vision of a better technological world

#5yrsago WPA2 was kracked because it was based on a closed standard that you needed to pay to read

#5yrsago Bake: fizzing Alien facehugger pudding-cups

#5yrsago Panama Papers journalist assassinated by car bomb in Malta

#5yrsago Listen up: you really owe it to yourself to read 15 Vlad Taltos novels, seriously

#5yrsago Jeremy Corbyn: damned right we’re a threat to the economic order

Colophon (permalink)

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