Kroger, Albertsons and the Biden Administration’s New Antitrust Playbook

Are Kroger Co. and Albertsons Companies Inc. titans of the grocery business or actually not so big? A court’s answer to that question will be pivotal to whether a merger of the two supermarket chains is allowed to go through.

The Federal Trade Commission, which sued on Monday to block Kroger’s acquisition of Albertsons, says they are indeed huge. “The proposed acquisition is by far the largest supermarket merger in U.S. history,” one that would unite “the No. 1 and No. 2 traditional supermarket chains in the United States,” it says in its complaint. It’s seeking a federal court’s preliminary injunction and temporary restraining order against the merger.

The F.T.C. is correct on the numbers, but the key word is “traditional.” Traditional supermarket chains no longer dominate the grocery business. Who does? Walmart, which, including its Sam’s Club division, had $318 billion in grocery sales last year, for a 29 percent share of the market, according to data compiled by Solomon Partners, a financial advisory firm hired by Albertsons.

Kroger is a distant second to Walmart, with a 10 percent market share, and Albertsons is fourth (behind Costco Wholesale), with 6 percent. So even if Kroger and Albertsons merged, they would be only a little more than half of Walmart’s size.

This is where things get interesting. The F.T.C. obviously can’t argue that Kroger and Albertsons together would tower over all competitors, so it’s making a subtler case. It says that the market that’s relevant for assessing competition isn’t all sellers of groceries in general but supermarkets in particular.

“Supermarkets recognize other supermarkets as a distinct type of food and grocery retailer,” the complaint says. “For example, supermarkets track and respond to other supermarkets’ promotions and customer-service options. When determining their pricing, supermarkets primarily consider the pricing of other supermarkets.” In other words, the F.T.C. argues, extinguishing the rivalry between Kroger and Albertsons would be bad, even though customers can still shop at club stores, limited-assortment stores (such as Aldi and Trader Joe’s), premium and organic stores, dollar stores and online purveyors.