Last week, the FTC sued to block a merger between Kroger Co. and Albertsons. The suit had been expected for some time, especially after several states filed their own complaints. Less expected, though, was the FTC’s novel legal theory. Though the FTC cited some traditional antitrust concerns, such as potentially higher prices, it emphasized the merger’s potential harm to unions. That theory made the complaint both legally novel and politically significant. It marked one of the administration’s most visible attempts to boost its allies in organized labor.

Announced in October 2022, the merger was in trouble from the beginning. Both companies are heavily unionized, mostly by the United Food & Commercial Workers Union (UFCW). Though the national UFCW at first demurred, local chapters swiftly condemned the merger. And the national union eventually collapsed under pressure and did the same.

That opposition effectively dictated last week’s outcome. Any merger faces an uphill climb with this administration, and labor opposition effectively marks the deal for death. That’s why Microsoft worked so hard to burnish its labor bona fides when it was trying to buy videogame maker Activision Studios.

So it should have been no surprise that the FTC sued to block this deal. More surprising, however, was the agency’s theory. The FTC cited a laundry list of traditional harms that come out of big mergers. For example, it said that the combined company would have more pricing power and so would raise costs for consumers. It also said the company would have redundant stores in some markets, which would allow it to close outlets and reduce consumers’ shopping choices.

Less traditionally, the FTC argued that the merger would dampen competition for workers. It said that the companies often compete for the same workers, and this competition forces them to offer better wages and benefits. For example, they offer better healthcare, scheduling, and retirement benefits than they otherwise might because they’re afraid of losing employees to each other. But a combined company would have no incentive to bid against itself. So the merger would “destroy” competition for workers.

That theory is odd on the surface. Grocery workers are, after all, retail workers. And retail workers change jobs at some of the highest rates in the country. According to one study, in a twelve-month period from 2020 to 2021, nearly forty percent of retail workers either moved to a different employer or left the industry entirely. The only workers who moved more often were homecare, food service, and temporary-help workers.

The reasons for their mobility aren’t hard to understand. Retail workers have skills that easily transfer from one employer to another. A retail clerk at Kroger can use her skills at Costco, Target, or even Best Buy. In economic terms, she has high “job mobility.” So even if two of the biggest grocers became one, she would still have options. The combined company would still have to compete to keep her. If it didn’t, she could easily cross the street and work at Macy’s.

The FTC gets around that problem by doing what good antitrust litigators do: it defines the market narrowly. It says that the relevant market isn’t retail labor, or even grocery labor. The relevant market is unionized grocery labor.

That’s a convenient market definition for the FTC’s case. Today, Kroger and Albertsons are the two biggest unionized grocers. And the union often uses that fact against them. In markets where they overlap, the union often schedules their contracts to expire simultaneously. It then plays them off each other in negotiations. It picks a target and tells consumers to shop at the other company. It also threatens to strike the target, forcing customers to shop with the competitor. But these tactics, the FTC says, wouldn’t work against a combined company. A single grocer could weather a strike and hold out for better terms. So the merger would sap the union’s effectiveness and harm competition for labor.

That argument makes sense only in a funhouse-mirror version of competition policy. It says, in effect, that the merger will reduce competition because it will undermine anticompetitive activity.

Keep in mind that modern labor markets are not models of perfect competition. They operate under numerous government interventions, ranging from minimum labor standards to mandatory collective bargaining. The merits of those interventions are disputed, but no one disputes that they are anticompetitive. They effectively forbid labor competition on certain terms. Workers may not compete with each other by selling their services below a minimum level. And companies may not freely purchase labor at market rates when they have a union. Instead, they must negotiate terms with the union—terms that often exceed market rates.

None of this is news. Unions’ effect on competition has long been understood. As early as 1940, the Supreme Court recognized that “an elimination of price competition based on differences in labor standards is the objective of any national labor organization.” In other words, unions achieve their goals mainly by suppressing competition. That’s why courts in the early 20th century often treated unions as cartels and condemned them under state and federal antitrust laws. It was only after Congress explicitly exempted unions from antitrust—twice—that they were able to achieve something like a stable legal status.

Of course, unions are now firmly established. No one suggests that they violate modern antitrust law. But we shouldn’t mistake their legal exemption for an economic fact. In exempting unions from antitrust, Congress wasn’t suggesting that they promoted competition. Rather, it was suggesting that unbridled competition in labor markets was bad for workers. Competition led workers to sell their labor at impoverished rates; workers would scrap and claw for the chance at any job. That, at least, was the mindset of the Depression-era lawmakers who passed the NLRA and made collective bargaining America’s national labor policy.

The FTC simultaneously ignores that history and turns it on its head. The agency treats a deliberate exemption from competition policy as the competitive norm. It characterizes union power as a baseline market condition. It then argues that anything upsetting that baseline is anticompetitive. But union workplaces are already anticompetitive. They already operate under government interventions to suppress competition. They are no more meant to be competitive than the self-checkout lane is meant to be a full-service experience.

The FTC surely knows this. But it isn’t really suing to protect competitive labor markets. It is suing because unions oppose the deal. From the beginning, the Biden administration promised to be the most pro-union government in history. And it has followed through on that promise with a whole-of-government approach. This complaint is only the latest example. The administration may believe in labor-market competition in some abstract sense. But far more important than competition is protecting its most cherished constituency: labor unions.

Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at [email protected].