Oregon should learn from blocked Spirit merger before it’s too late

By Tirzah Duren,
VP of Policy and Research at American Consumer Institute

The Federal Trade Commission’s (FTC) complaint against the proposed merger of the Albertson’s and Kroger grocery chains was joined by state Attorney Generals across the nation – including Oregon. The Beaver State found even more support as a Community Review Board recently joined the ranks of those opposed to the merger. However, rather than race to protect the status quo, states like Oregon should learn from the proposed Spirit and JetBlue merger, whose failure left consumers with fewer options.

In its complaint, the FTC alleges that a merger between Albertson’s and Kroger would lessen competition for grocery and labor in the markets of supermarkets and union grocery labor, respectively. Part of the reasoning is that competition between these two grocery retailers would drive down prices for consumers. Without such competition, the agency reasons, prices could increase.

While the focus on union labor may fall outside the scope of the consumer welfare standard, a legal tool that filters antitrust violations based on whether they result in consumer harm, a focus on price is valid. Such concern was mirrored in another merger complaint that focused on low-cost travel as opposed to low-cost food.

In the Department of Justice’s (DOJ) complaint against the merger of Spirit and JetBlue airlines, the agency argued against the deal in part due to the Spirit effect, which would decrease fares in markets where the airline competed.

While preserving this effect is seemingly in the interest of consumer welfare, the successful attempt to block the merger reduced competition and consumer welfare in other ways.

Since Spirit hasn’t been profitable since 2019, and JetBlue announced net losses in 2023, the combined merger of Spirit and JetBlue would have put the companies in a better position to compete against the Big Four airlines, which are Delta, American, Southwest, and United.

Following the failed merger, the already rocky financial positions required both airlines to make tough calls. Jet Blue eliminated service to five cities and reduced flights in other locations after the decision. Meanwhile, Spirit furloughed 260 pilots and delayed new jets. Such reduced services don’t serve consumer welfare any more than increased prices do.

The DOJ should have been concerned with the economic incentives driving the merger in the first place. As outlined in the complaints, the airline industry has consolidated over the last few decades and went from more than a dozen major players to the current landscape of four major players. However, the agency was so concerned with further consolidation that it didn’t adequately consider how a fifth major play could benefit competition.

Oregon should not make the same mistake with the proposed merger of Albertson’s and Kroger. Like the airline industry, groceries are changing rapidly with the introduction of online food services that range from meal kits to pre-prepared meals and delivery of groceries. However, the relevant market listed in the complaint doesn’t consider this and instead narrowly focuses on the idea of a traditional brick-and-mortar grocery store. This completely ignores the competition that Albertson’s and Kroger are facing from retail giants like Amazon. In addition, Costco and other superstores are not considered grocery stores, but they are nonetheless intense rivals.

Protecting competition is an essential role that the FTC fills. However, protecting competition should reflect current market realities. For airlines, that means competing with the Big Four, and for grocery stores, it means finding a way to survive in a changing and growing environment of nongrocery competitors.

Lawmakers in Oregon should take the hard-learned lessons from the failed airline merger and avoid making the same mistake with the proposed grocery merger.

Tirzah Duren is the Vice President of Policy and Research at the American Consumer Institute, a nonprofit educational and research organization. You can follow her on X  @ConsumerPal.