Adam Smith theorized that
price competition on products and labor would allow the self-interests of the
buyers and sellers to result in unintended beneficial consequences. For one
thing, price gouging would not happen because, assuming low barriers to enter
the market to sell, competitors would quickly drop their prices and gain market
share. That grocery prices did not fall after the supply-shocks, including in
shipping and hiring workers, ended with the end of the coronavirus pandemic in
early 2023 is a pretty good indication that the grocery (and meat producer)
industry was not competitive. Oligarchic markets—those in which just a few,
often times very large, sellers exist—are devoid of the competitive mechanism
that would otherwise maintain prices that are fair to buyers. That is, not only
do competitive markets efficiently allocate goods and services at prices that
connect supply to demand; such markets can also satisfy the ethical virtue of
justice as fairness. Smith was not shy in admitted that a government willing to
stand up to big companies is necessary to keep a market from slipping into the
decadence of an oligopoly and especially a monopoly. I contend that both Americans
and their elected representatives were blind, perhaps conveniently so given the
power of large companies in American governments, both during the coronavirus
pandemic, which ran from roughly 2020 to 2022, and even afterwards as Kroger
and Albertsons colluded at the expense (literally) of their respective
customers and workers.
On February 26, 2024, about a
year after the coronavirus pandemic ended in the United States, the Federal
Trade Commission “sued to block the largest proposed supermarket merger in U.S.
history—Kroger Company’s $24.6 billion acquisition of the Albertsons Companies,
Inc.—alleging that the deal is anticompetitive.”[1]
While
testifying to a Federal Trade Commission attorney , Andy Groff, Kroger's senior director for pricing,
said the grocery giant had raised prices for eggs and milk beyond inflation
levels. In an internal email
to other Kroger executives, he had written, "On milk and eggs, retail
inflation has been significantly higher than cost inflation."[2] Of course, the company’s strategy was to
try to discredit Groff rather than assume responsibility for having taken
advantage of the pandemic. It was telling, however, that at least at Albertsons,
including its Safeway division, the practice of weekly discounts shown on the shelves
was greatly diminished. So, we can add ending discounts to price gouging to
understand the true sticker shock that customers encountered.
The price gouging alone was “not at all surprising," Drew Powers, the
founder of Illinois-based Powers Financial Group, has said. Economists had “long indicated that the
grocery sector, which is composed of only a few chains like Kroger and Walmart,
was benefiting from supply chain disruptions during the pandemic, allowing the
companies to hike prices beyond what was necessary to retain profits. According
to Alex Beene, a financial literacy instructor, "Supply
chain issues, rising shipping costs, and increased wages certainly played their
part in the higher prices we're currently seeing. However, the admission some
prices were elevated simply because businesses knew they could doesn't help the
case for those arguing price gouging isn't an issue."[3]
Perhaps even more disturbing, but much more subtly, Kroger and Albertsons did not lower prices after the unique economic context of the pandemic had ended. In fact, both companies saw record profits into 2024 and a generally increasing trend from 2010 that belies any claim to have needed to raise prices during the pandemic to stay in business. In fact, the profits during the pandemic were greater than in 2018-2020, and record profits as of January 31, 2024. Not coincidentally, the grocers provided customers with just a slight reduction in prices of food items in 2024 even though the huge increases during the pandemic had been said to be specific to it. This demonstrates that the industry had ceased to operate in a competitive market. The following graphs from Metatrends.net of gross profits for the years (January 1) 2009 - (January 31) 2024 tell the tale, a picture being proverbially said to be worth a thousand words.
Kroger (left) and Albertsons (right) Gross Profit ($)
That Albertsons increased prices excessively during 2022 can be inferred from the fact that the company's net income that year increased 51% from 2021 even though the pandemic was still occurring. In July, 2024, Newsweek stated the following: “Companies across multiple industries have been posting record profits since the [coronavirus pandemic] while consumers have faced the highest inflation in recent history. The math can only point to companies raising prices above the general level of inflation. As the old saying goes, 'Never let a good crisis go to waste.'"[4] And never let the end of a crisis be the end of the party, for the excuses can run their natural course if the herd animals (and their leaders) are gullible (and corrupt) enough.
That a grocery-store worker filed a class-action lawsuit against
both Kroger and Albertsons in Colorado on November 25, 2024 for having colluded
“against striking employees to keep pay and benefits down” may indicate that
the giant chains took advantage of workers too.[5] The suit alleges that “the
two competitors reached an illicit agreement not to poach employees or
customers during a 2022 work stoppage.” This “gave Kroger an upper hand against
its employees’ union during contract talks,” and Albertson too would likely
benefit as it had the same union.[6] The word most erroneous
here is competitors, and if Kroger and Albertsons were not competing for
employees or customers, then it would have been easy for both managements to
raise prices, essentially creating inflation (i.e., above costs and a
reasonable profit), in taking advantage of the pandemic turned into a
rationale for higher prices and then of societal expectations that
price increases would happen and be legitimate.
That Kamala Harris ran for U.S. president in 2024 with only vague
promises to help consumers with high food prices rather than a bold promise to
wipe off the Sherman Anti-trust Act to apply it to break up both Kroger and
Albertsons is so glaring that it could (and should) be asked whether, or to
what extent, that industry, as well as the concentrated meat-producer industry,
was made financial contributions to Harris’ campaign. Even President Biden’s
decision to oppose the merger of those two companies ignored the likely
possibility that the grocery (and meat-producer) industry was already too
concentrated (i.e., oligopolistic) for price competition to have lowered food
prices after the pandemic. Both
the president and the vice president (i.e., Harris) were too snug with the
status quo, and perhaps relatedly too influenced, financially and otherwise, by
the grocery (as well as meat-producing and even restaurant) industry. That the
profits of Kroger and Albertson grew not only during the pandemic, but
also in its wake, especially as compared with the pre-pandemic numbers, should
have been an obvious indication that Adam Smith’s apotheotic competitive-market
model could no longer operate due to the enormous sizes and few number of
grocery chains in the United States. Enough voters may have been angry at Biden
and Harris for not using the judiciary to restore competition—only acting to
oppose the merger—to vote for Harris even though Trump would not likely
apply anti-trust law even to the merger. A similar rationale concerning
Biden and Harris actively supporting Israel militarily even after the UN’s top
court had ruled that the occupation violated international law can be applied
for why Harris lost. Enough of the American electorates wanted boldness in
place of status-quo timidity that they were willing to vote against Harris and
even for Trump even while disagreeing with his bold policies, such as on
stopping illegal immigration.
2. Suzanne Blake, “Kroger Executive Admits Company Gouged Prices Above Inflation,” Newsweek, August 31, 2024.
3. Ibid.
4. Ibid.
5. Dave Jamieson, “Worker Sues Kroger and Albertsons, Alleging Collusion Against Union,” The Huffington Post, November 26, 2024.
6. Ibid.
