The Federal Trade Commission and Department of Justice released a proposed update to merger enforcement guidelines, Wednesday, that would include considerations for mergers that enhance buying power, according to the National Grocer’s Association. The draft update of the merger guidelines describes how the agencies review mergers and acquisitions to determine compliance with federal antitrust laws.
“Unchecked consolidation threatens the free and fair markets upon which our economy is based,” said Attorney General Merrick B. Garland in a statement. “These updated merger guidelines respond to modern market realities and will enable the Justice Department to transparently and effectively protect the American people from the damage that anticompetitive mergers cause.”
The draft update proposes thirteen guidelines that contribute to a more specialized framework to assess and evaluate the legality of mergers and acquisitions. One of the guidelines directly addresses buyer power where a merger of competing buyers lessens competition for other sellers, according to NGA. Buyer power, or monopsony power, occurs when a single buyer controls most of the market.
The proposed changes incorporate concerns that NGA brought to federal enforcers in April 2021. In comments submitted to the FTC and DOJ, NGA urged the agencies to consider how dominant firms use their bargaining leverage to impose discriminatory terms on their rivals. NGA outlined how dominant food retailers enjoy a substantial advantage over rivals with their ability to squeeze suppliers for more favorable terms, including through price, promotions, payment terms, and product availability.
“NGA is pleased to see federal antitrust enforcers take seriously the competitive concerns that arise when dominant firms abuse their buyer power to impose discriminatory terms on their rivals,” said NGA SVP of government relations and counsel Chris Jones, in a statement. “NGA and its members have consistently warned federal antitrust officials about how US consumers are worse off due to buyer power abuses in an increasingly consolidated grocery sector. This problem has been laid bare by pandemic-era supply chain disruptions and increasing food price inflation where independent grocers have been put at [a] critical disadvantage relative to their dominant competitors, especially those who serve rural and urban communities.”
Only four national grocery retailers account for 69 percent of all US grocery sales, according to data from market research organization Food and Water Watch. Two of these top four retailers, Kroger and Albertsons, submitted plans to federal enforcers in 2022 to merge by early 2024.
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