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July 25th, 2013

Mergers: Good for Executives, Bad for Consumers

By Tyler Shannon

Foodopoly 2013 accelerated with the second grocery chain merger in under two weeks. Last week, we reported on the Kroger-Harris Teeter merger, and on Monday, Midwestern food retailers and distributors Spartan Stores and Nash Finch announced their proposed $1.3 billion merger. The Michigan-based Spartan and Minnesota-based Nash Finch sell $7.4 billion in groceries from 177 stores and distribution hubs covering 37 states. The new combination would also become the largest food distributer to U.S. military commissaries. Executives of the two companies say that this is just the beginning of an acquisition strategy designed to create the largest food distributor in the U.S.  

Grocery stores claim these mergers lower costs and make the chains more efficient. Unfortunately, little of the purported savings are passed onto consumers through lower prices. Instead, consumers have fewer choices: the big chains push out smaller, regional favorites; consumers often have to travel further to reach the grocery store they prefer; and even the selection of foods in the supermarkets are all choices that are made by the grocery behemoths.

A mountain of academic research has shown that more consolidation increases prices that consumers pay at the checkout aisle. But consumers don’t need ivory towered academics to tell them groceries are pricier under the Foodopoly – they see it every time they go to the grocery store.

2013 is already shaping up to be the year of the merger. This rampant takeover activity could signal the start of a wave of grocery store mergers that might rival the merger mania of the late-1990s when 3,500 supermarket stores changed hands. That wave of mergers led to the creation of the giant supermarket powerhouses that now stand between us and our food supply.

The federal government must put the brakes on Foodopoly mega-mergers. American consumers deserve a moratorium on new mergers. And it is long past time for the Department of Justice and Federal Trade Commission to break up the cabal of corporate retail giants that have a stranglehold over our food system. 

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