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Ten Percent of a Market is Not a Monopoly


By Justin Leventhal, American Consumer Institute

The old saying goes that there are only two guarantees in life: death and taxes. But for the last few years, it seems frivolous Federal Trade Commission (FTC) challenges have also joined the list. The FTC has yet again decided to legally challenge a pro-competitive merger, despite the Commission’s repeated recent failures in court. As Kroger bids to merge with Albertsons, the FTC is setting itself up for potential failure yet again by challenging it.

Under Lina Khan and the Biden administration, the FTC has continually attempted to extend the bounds of its mission by employing novel definitions of harm in a market, often ignoring consumer well-being in the process. It has attempted to define markets as narrowly as possible to make normal competitive mergers look like monopolies. Overly narrow market definitions allow the FTC to call almost anything a monopoly, which it now does frequently, such as in the case of the Microsoft-Activision merger.

In their new definitions of harm, the FTC has lowered the standard for market concentration to 30 percent, far below the 50 percent standard that courts have required to be considered to have monopoly power. It is even further below the 60 percent standard the Federal Communications Commission applied to AT&T, which is supported by academic research.

While a 30 percent market threshold for a company to be regulated as a monopoly is economically obtuse, as of September 2022 the combined market share of Albertsons and Kroger is only 10.8 percent. That is significantly less than the FTC’s poorly thought-out 30 percent threshold. And that is after years of decline for Kroger’s market share.

Should the merger be completed, Walmart would still have more than twice the market share of the combined companies with over 25 percent of the grocery sales market. To alleviate concerns about Kroger having even a local monopoly, 413 stores will be sold in overlapping markets as part of the deal, and the companies are willing to sell another 237 if needed. After accounting for divestiture Kroger would still only be the third largest grocery provider with only 9 percent of the market.

Kroger has even explained how it intends to use the merger to be more competitive with other grocery stores such as Walmart. The company has committed half a billion dollars to lowering prices, $1.3 billion enhancing consumers’ experience, and another $1 billion to increase wages and benefits for their employees. Even a labor union representing many of the employees of these companies has endorsed the merger.

Despite the obvious benefits, including a grocery chain large enough to offer better competition to the current industry leader Walmart, the FTC has decided to push ahead with yet again another dubious challenge that, if successful, would leave consumers worse off.

The FTC’s challenge comes with the encouragement of numerous members of Congress, including Senators Elizabeth Warren and Bernie Sanders, who wrote to the FTC encouraging it to challenge the merger. Despite the small size of the companies relative to the overall  grocery market, the FTC letter’s signatories demonstrate a lack of understanding of market concentration and market power, as does the FTC for parroting the same ideas.

The Senators first state that the merger would result in a monopoly because five companies would control a combined 55 percent of the grocery market. Ironically, this appears to describe a competitive market given that a 50 percent market share in a single company has been the standard for possible monopoly power for decades. This can also be extended to their claims that Kroger will be left with a dominant position in the market, despite the merger leaving Kroger with less than half the market share of Walmart.

The argument that the merger will harm suppliers faces the same problem. Because no company has a market share large enough to exercise monopoly power, none have the market share for monopsony power either, where a buyer has monopoly purchasing power. The same issues arise with the argument that Kroger will have too much power over their already unionized labor force as an employer. In each case Kroger simply does not and will not have the power it is accused of due to its limited relative size in the grocery market.

By using a vague and arbitrary standard the FTC has brought frivolous challenges that harm consumers by preventing, delaying, or raising the costs of normal business practices that promote competition and benefit consumers. Instead of inventing novel ways to challenge reasonable corporate mergers, the FTC should look up the consumer welfare standard it abandoned under its current leadership. If it did, it would likely find fewer of its cases being rightly thrown out by the courts.


Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.