Biden Labor Speech
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When the government sues to stop a corporate acquisition, one common claim is that the newly combined entity would charge higher prices, limit quantities, reduce quality, or will face less competitive pressure to improve their offerings. In the case of the FTC’s recent challenge to the proposed merger between grocery chains Kroger and Albertsons, the FTC makes those claims but with one important addition: unionized grocery workers will likely be paid less or otherwise face harsher working conditions by the combined company.
This allegation makes good on the FTC’s and the DOJ’s promise in the most recently published merger guidelines (see here) that harms to workers are just as important as harms to consumers who buy from the merging parties. The guidelines state that the government will look at the merging firms’ ability to cut or freeze wages, slow wage growth, exercise increased leverage with workers in negotiations, or generally degrade benefits without prompting workers to quit.
For Kroger and Albertsons, the FTC claims that the companies aggressively compete with one another to hire and retain grocery workers, principally through collective bargaining negotiations with unions. The FTC claims that this competition results in higher wages, better benefits, and improved working conditions for employees. The proposed acquisition would eliminate or greatly curtail this competition, threatening the ability of hundreds of thousands of grocery store workers to secure stronger contracts with improved wages and benefits.
In its case, the FTC further focuses on the fact that unions of grocery workers have consistently played these employers off of one another, with the threat of a strike to one of the grocers having competitive ramifications on the other. In addition, says the FTC, the grocers monitor wages and benefits between each other, and to retain high-performing workers, the grocers often promote them, offer retention bonuses, or improve their hours.
This raises the question of whether similar arguments be made for any two competitive companies seeking to merge who also compete for employees. One could argue that this merger challenge is specific to the union or specialized worker context, but it is not hard to fathom that this type of competition between employees on a mass scale exists in other markets.
Those following the FTC closely over the last three years may observe that this action is emblematic of an antitrust agenda that is aiming to tackle societal harms broader than “consumer welfare” (see prior discussion of this concept here). Critics of this agenda have argued that antitrust is not meant to be a societal “cure-all”; rather, the antitrust laws were meant to protect competition for commerce, i.e., prices for goods and services, quantities, and quality.
Highlighting this fact, in the past, when mergers would arguably permit cost cutting by eliminating duplicative jobs, merging parties argued those facts as a procompetitive efficiency leading to lower consumer costs. Arguably, those types of arguments (which rarely prevailed), became an impetus for a shift to protect, rather than harm, workers through antitrust.
The Court presiding over the Kroger case has scheduled a trial this August to determine if it will block the deal from proceeding. While it is possible that the FTC could prevail by showing that the prices of groceries in certain geographies will go up (even with divestitures that the merging parties have proposed), the issue FTC leadership may be watching most closely is whether the alleged harms to employee benefits and compensation support or even carry the outcome.
For instance, if the Court finds that grocery prices would not likely increase, but employee wages would go down, it remains to be seen if that would be sufficient to stop the transaction. Whether the FTC will make predictions about specific employee harms in the post-merger world remains to be seen.
Leadership Strategy Implications
Because both sides of the political spectrum are treating competition for labor as a top priority, this puts a premium on companies’ ability to prioritize their employees’ satisfaction. As discussed in a prior column, this is an area where companies can simultaneously minimize antitrust risk as well as maximize their profitability.
For instance, if a company’s employees generally find that they are competitively paid and treated well, there is less incentive and ability for the government to argue that actions taken by employers (such as a merger or distribution change) will result in competitive harms to a labor market. Conversely, if employees with specialized skills do not feel they are competitively compensated, the government (or even the employees themselves) may look for reasons why, outside of employees’ individual circumstances.
Beyond pay and other benefits, employees are also looking for ways that their employer is moving its industry forward and contributing toward a mission that they believe in. If employees find their work meaningful and important to the industry, it not only minimizes antitrust risk for labor, but it also has the resulting benefit of providing valuable defenses to other types of antitrust claims (such as for monopolization).
Thus, while there can be a tendency to think of employee satisfaction as an “HR issue,” the government’s point is that fighting to make your employees satisfied should be just as high a priority as beating out your business competitors. And often both goals can be accomplished with the same initiatives.
