Written by Judy Godoy
(Reuters) – Federal Trade Commission Chair Lina Khan’s push to use antitrust laws to protect workers is being tested in a trial that began on Monday as the agency alleges that grocery chain Kroger Inc’s proposed merger with rival Albertsons Inc would crush the bargaining power of union workers.
Khan and her fellow antitrust officials in the Biden administration have sought to use antitrust laws — deployed in recent decades mostly to protect consumers from high prices — to combat what they see as anticompetitive practices that squeeze workers’ paychecks.
The work has been an area of focus for Khan, a former law professor and congressional antitrust counsel, who took the reins at the agency in June 2021.
“Since I took office as chairman, I have been reminded, time and again, of the ways in which the FTC’s decisions profoundly and directly affect the well-being of people who work for a living,” Khan said in a speech at Harvard University in February.
“This is really important for her,” said Rebecca Howe Allensworth, an antitrust professor at Vanderbilt Law School, referring to Khan. “This is the first prominent example of a merger attempt using labor market theory.”
The lawsuit alleges that the merger would concentrate ownership and lead to higher grocery prices.
The two states’ attorneys general separately warned that the new company would own more than 50% of grocery stores in Washington state and account for just under half of grocery sales in Arizona.
The FTC also argues that the deal should be blocked because it reduces unions’ ability to play the two chains against each other in negotiating wages and benefits, especially in California and other states in the western United States where some Kroger and Albertsons stores are located close to each other.
The United Food and Commercial Workers union said 115 of Albertsons’ 159 stores in Los Angeles and Orange counties are within two miles (3.22 kilometers) of Kroger stores, making them vulnerable to closure if Kroger fails to keep its promise to keep stores open.
Kroger’s attorney said Monday during opening arguments in the case that the company is a “proud union store” and will continue to honor collective bargaining agreements with Kroger and Albertsons workers after the deal.
The company said no stores will be closed as a result of the merger, front-line workers will not lose their jobs, and it will spend $1 billion on improving wages and benefits.
“The only winners if this merger is blocked will be the larger, non-union retailers who will continue to struggle with union growth,” a Kroger spokesperson said in a statement.
Kroger and Albertsons have argued in their court papers that they will be allowed to negotiate jointly with unions even without a merger.
“The text and precedents make clear that antitrust laws have no place in the field of labor relations,” they said.
Last week, the National Labor Relations Board stepped in, urging the judge overseeing the case to reject Kroger’s argument that labor law bars the FTC’s claims.
The hurdle the FTC will face, experts said, is showing that union grocery store jobs constitute a unique labor market and cannot be easily replaced by other jobs in the grocery and retail sector.
“The court may or may not accept that,” Alansworth said.
Khan has made competition in the labor market a major focus of her tenure, to the dismay of some business groups who have complained that the agency is going too far.
The Federal Trade Commission’s ban on non-compete agreements was recently blocked by a Texas court after the U.S. Chamber of Commerce filed a lawsuit over the rule.
Last year, the Federal Trade Commission and the Justice Department included labor and suppliers among the aspects they examine in merger reviews.
The Federal Trade Commission has raised labor concerns in cases seeking to block acquisitions by mattress maker Tempur Sealy International (NYSE: ) and luxury handbag maker Tapestry (NYSE: ).
Although the Kroger acquisition is the first merger case to go to trial over the impact on union labor, experts said it builds on other issues.
The Justice Department, states, and private plaintiffs have successfully used antitrust laws to challenge restrictions on college athletes, and the Justice Department blocked the merger of Penguin Random House and Simon & Schuster over concerns that it would lower contract rates for authors.
Claire Kelloway of the Open Markets Institute, an antitrust think tank, said that while the Kroger case could be decided on grocery prices alone, any ruling on the FTC’s labor claims could bolster further efforts to challenge mergers over negative effects on workers.
“This would certainly open up a lot of potential new avenues for thinking about how mergers can damage labor markets,” she said.