Opinion: Massive corporate mergers are hurting American workers

photo by: Contribution

Robert Reich

In front of the Federal Trade Commission on Pennsylvania Avenue in Washington, where I used to work, there is a giant sculpture of a runaway horse being restrained. It is called “Man Controlling Trade.” The allegorical sculpture by Michael Lantz is one of two installed in 1942 as part of a New Deal-era program run by the Treasury Department’s Section of Painting and Sculpture to commission art for federal buildings.

The idea that government should rein in the wild forces of capitalism was well established by 1942. America had gone through the catastrophic Great Depression, which exposed the need for stronger regulation of business and finance. The nation was also beginning to mobilize its economy to fight World War II.

America understood then that stable prices and good wages depended on government curbing corporate greed for the good of all. That wasn’t socialism or communism. That was democratic, progressive capitalism. That was the way to save both capitalism and democracy.

Last week, the Federal Trade Commission (FTC) ruled in an Oregon court and began to put a stop to two giant, out-of-control grocery chains — Kroger and Albertsons — that want to merge into the largest grocery store combination in history and pocket your money and the wages of many of your employees.

It’s the first time antitrust law has been used to both tame consumer prices and help workers earn better wages. It’s an illustration of how the Biden-Harris administration is trying to restructure the economy for the common good — and what the Harris-Walz administration will hopefully have the opportunity to do even more.

The FTC’s position is supported by three arguments:

1. Grocery prices are already sky high, in part because there isn’t enough competition in most local grocery markets to force chains to lower their prices. Kroger and Albertsons are the two largest grocery chains in America. If they were allowed to merge, the combined company, plus Walmart, would control 70% of the grocery market in more than 150 cities. That means even higher prices.

2. The proposed $24.6 billion merger would not only put 5,000 American grocery stores under one corporation. It would put 41 retail grocery brands and 4,000 drug stores under the same corporation. It would send a signal to every other industry that they can make big profits by further monopolizing.

3. If allowed to merge, Kroger and Albertsons would also put their 700,000 workers in one corporation. Those workers would then have to negotiate with one giant grocery chain that would rule everything. That would weaken their bargaining power, leading to lower wages, worse benefits, and fewer worker protections.

This last point — the link between corporate concentration and lower wages and benefits — is almost never raised in antitrust litigation, yet it is critical to understanding the current structure of the U.S. economy and why so many American workers rightly feel cheated.

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Since the late 19th century, the U.S. government has determined the extent to which corporations can join together to gain market power, and to what extent workers can join together in unions to gain bargaining power. This balance of power has had the same effect on prices and wages as supply and demand—indeed, it sustains supply and demand.

In 1890, and again in 1914, the United States passed antitrust laws. Teddy Roosevelt and Woodrow Wilson were staunch trust busters. In 1935, FDR signed the National Labor Relations Act, which allowed workers to form unions and required employers to negotiate in good faith with those unions.

In 1950, big business and big labor were in an uneasy balance. This balance of power was crucial to the development of both the American economy and the American middle class. It favored a basic arrangement: as corporations became more profitable, their workers became more so.

But over the past 40 years, according to Unionstats.com, union power has plummeted while corporate power has soared. The result is near-record levels of inequality.

In 1955, more than one-third of all private-sector workers were unionized, giving them considerable bargaining power in the fight for higher wages. (Employers with nonunion workers often offered their workers nearly the same wages and benefits as those in the unionized sector in order to ward off unionization.)

Currently, only 6% of private sector workers belong to trade unions.

Meanwhile, over the past two decades, more than 75% of U.S. industries have become more concentrated.

Four beef packers now control more than 80% of their market, domestic air travel is now dominated by four airlines, and many Americans have only one choice for a reliable broadband Internet provider. Just four companies—Walmart, Costco, Kroger, and Albertsons—dominate the grocery industry.

When few workers are unionized, wages stagnate or fall. Without adequate competition, prices and corporate profits rise. The result: wealth is siphoned off from workers and consumers to large corporations and shareholders.

In the late 1970s, I worked at the Federal Trade Commission, which was actively fighting anticompetitive mergers and monopolies. But the Reagan administration softened its grip on them. Reagan also encouraged attacks on unions, as exemplified by his firing of striking air traffic controllers (who, in fact, had no right to strike).

The Biden administration has made it a priority to both combat corporate concentration and strengthen labor unions.

Lina Khan, the FTC chairwoman, and Jonathan Kanter, the assistant attorney general for the Justice Department’s antitrust division, are aggressively fighting corporate power. Jennifer Abruzzo, general counsel of the National Labor Relations Board, is aggressively protecting workers’ rights to organize.

But there’s still much, much more to do. Last week, Khan, Kanter, Abruzzo and Labor Secretary Julie Su signed a memorandum of understanding that allows them to coordinate their efforts even more closely.

But they also need more resources to do their important work. Inequality is out of control. Large corporations are more profitable than ever. CEO pay is insane. (Kroger paid its CEO $15 million last year, 502 times the average Kroger employee’s salary. If the merger goes through, the Albertsons CEO would receive $43 million, on top of his $15.1 million salary.)

But most workers still receive a small share of the economic gains. The latest estimates put the median household income at $74,580.

Both sides of the economic equation—corporate power and worker power—must be considered. The Biden-Harris administration has made a good start in reducing corporate power and increasing worker power. Stopping the Kroger-Albertsons merger is an important step along that path.

Let’s hope the Harris-Waltz administration takes many more steps like this.

—Robert B. Reich is a columnist for Tribune Content Agency.