Lina Khan Goes Out With a Bang
7 min read
On Tuesday, the federal government succeeded in doing something that it hasn’t done, or even seriously tried to do, in decades: It persuaded a court to block one large supermarket chain from acquiring another. In a major victory for the Federal Trade Commission, Judge Adrienne Nelson of the U.S. District Court in Oregon temporarily halted the merger of Kroger and Albertsons—the nation’s second- and fourth-biggest grocery retailers, respectively—ruling that the deal would harm competition in hundreds of communities. Hours later, a state court delivered another blow, blocking the merger in a separate suit brought by Washington’s attorney general. By the next day, Albertsons had announced that it was abandoning the deal and suing Kroger for allowing it to fall apart.
The rulings offer the clearest proof yet that the new antitrust movement is breaking through. This merger, which sparked fears of higher grocery prices and closed supermarkets, captured public attention in a way that few antitrust cases have. Judges are people too, and they are aware of the debates about corporate power and competition that have been taking place over the past decade. (The organization that I co-direct, the Institute for Local Self-Reliance, is among the groups advocating for invigorated enforcement.) The Biden administration’s push for a more skeptical view of corporate concentration is gaining traction in the courts—a crucial development, because judges play a pivotal role in interpreting the law and setting the boundaries of what’s considered legal.
But the timing is awkward. The incoming Trump administration is all but guaranteed to go easier on merger enforcement. Shortly after Nelson’s ruling came out, Donald Trump announced what had long been expected: He will replace the current FTC chair, Lina Khan, with an appointee more friendly to corporate dealmaking. For at least the next four years, major federal merger challenges might be scarce. Still, states will almost certainly continue advancing the ball on their own. In the long term, the door to revived competition enforcement has been decisively cracked open—and it won’t be so easy to shut.
During the heyday of American antitrust, from the 1930s to the ’70s, few industries faced as much scrutiny as the grocery sector. In 1949, for example, the Justice Department won a landmark case against A&P, then the nation’s largest grocery chain, forcing the retailer to spin off its wholesaling division.
Beginning in the ’80s, however, antitrust agencies did an about-face. Under the influence of free-market economists and legal scholars, they decided that the efficiencies that might arise from consolidation outweighed the harms of having fewer competitors. Guided by this new principle, the FTC waved through hundreds of supermarket mergers over the past 40 years. When it did intervene, it typically went no further than requiring the companies to sell off a small number of stores in the most concentrated local markets.
Kroger and Albertsons are products of this history. Each has grown by buying dozens of other chains. Kroger is not just Kroger; it’s also Harris Teeter, King Soopers, Fry’s, Ralphs, Smith’s, and more. Albertsons is Safeway, Jewel-Osco, Vons, Shaw’s, Acme, and others. As the two retailers rolled up one rival after another, antitrust enforcers imposed barely a speed bump along the way, typically requiring the chains to spin off a fraction of stores to preserve a semblance of competition. When Kroger acquired Fred Meyer in 1999, the largest supermarket merger ever at the time, the FTC’s only stipulation was that the companies divest eight of their combined 2,200 stores. Similarly, in 2015, the FTC allowed Albertsons to acquire Safeway on the condition that it sell 146 stores to Haggen, a small retailer. (These so-called merger remedies rarely work, because the cast-off stores have to go up against the more powerful chain formed by the merger. Haggen, for example, soon filed for bankruptcy, closing many of the stores and selling others back to Albertsons.)
Against that backdrop, the FTC’s choice to challenge the latest merger was remarkable. Khan, appointed by Joe Biden to help roll back the Ronald Reagan–era approach to competition, rose to prominence as a legal scholar in part by arguing that the government should get back to focusing on preserving competition, which the antitrust laws explicitly require, rather than on chasing theoretical efficiencies, which they do not. But she isn’t the one who gets to decide how the law works. The FTC has to win its cases in court. And the federal courts have played a leading role in the weakening of antitrust, beginning even before Reagan took office. In case after case, judges appointed by both parties dismissed concerns about monopoly power, declined to stop mergers in concentrated markets, and made it so hard to prove certain antitrust violations as to make them effectively legal. The FTC’s reluctance to challenge mergers can be understood in part as learned behavior by an agency that has been slapped down by the courts.
Kroger and Albertsons seemed to be betting on the courts when they announced their intention to merge in the fall of 2022. Following the traditional playbook, the companies promised that the merger would create efficiencies—including by enabling job cuts and allowing the two chains to pool their data on shoppers, the better for advertisers to target them—that would lower prices for customers. And they offered to sell some of their stores to a rival retailer.
Nelson’s ruling suggests that corporations can no longer assume that the courts will rubber-stamp these standard justifications. She rejected the companies’ argument that the merger would create efficiencies sufficient to offset the harm caused by reduced competition. Encouragingly for antitrust reformers, she did this in part by focusing on real-world evidence rather than theoretical models. Internal company documents and testimony showed that, in many markets, Kroger and Albertsons view each other as their main competitor. “You are basically creating a monopoly in grocery with the merger,” one Albertsons executive wrote. Other evidence showed Kroger raising prices on milk and eggs, lowering them only if a nearby store owned by Albertsons did so. (In fact, in the separate trial of Colorado’s challenge to the merger, an executive testified that Kroger systematically raised prices at “no-comp stores”—that is, stores in towns where there was no competition—and kept prices lower in towns with another grocer.)
Nelson also rejected the companies’ divestiture plan, citing “serious concerns” about C&S, the proposed buyer—a grocery wholesaler with limited experience running retail stores. “Kroger gave us their worst chains,” a C&S executive complained in an internal company document presented by the FTC. Nelson also pointed to Albertsons’ own track record with the failed Haggen divestiture. Together, the two prongs of the ruling suggest a new willingness to apply skepticism to corporations’ hypothetical claims about how a merger will work out.
The question is what comes next for the antitrust-reform movement. Before antitrust nerds had even had time to read the full Kroger ruling, the Trump administration announced that Khan will be replaced next year by Andrew Ferguson, a current FTC commissioner and a former counsel to Mitch McConnell, the quintessential pro-big-business Republican. The pick seems to confirm what much of the Wall Street world already assumed: that antitrust enforcement under Trump will be much friendlier to corporate mergers than it was under Biden.
Even if the antitrust resurgence slows over the next four years, it is unlikely to be reversed, as the Kroger-Albertsons case illustrates. Too many people—including judges and the voting public—are looking at the issue with fresh eyes. The announcement of the deal in 2022 triggered immediate, widespread opposition, especially out West, where the chains hold large, overlapping market shares. More than 100,000 people sent comments to the FTC. The attorneys general of Colorado and Arizona held multiple public listening sessions. Local officials—including dozens of Alaska legislators, a contingent of state treasurers, and members of the Los Angeles City Council—publicly urged the federal government to act. Local newspapers, including the Anchorage Daily News and The Gazette, delivered a steady stream of coverage of the case. Opposition to the merger also brought together labor unions, small businesses, and farmers, in an alliance reminiscent of the old New Deal coalition. (My organization also opposed the merger.)
Crucially, antitrust is not the sole province of the federal government. State attorneys general—almost all of whom are elected—are empowered to enforce the laws too. Arizona Attorney General Kris Mayes has made fighting monopolies a central part of her agenda, vowing to Trump-proof her approach. New York’s Letitia James launched a probe of the proposed Capital One–Discover merger, and D.C. has filed an antitrust suit against major landlords for allegedly colluding to raise prices. The Kroger-Albertsons ruling might be the last hurrah of Lina Khan’s FTC tenure, but it probably will not be the last victory for the movement Khan represents.
