By Riad Beladi
In the retail world, supermarket mergers often raise concerns about market control, price manipulation, and reduced competition. A notable example can be found in the 1999 Carrefour-Promodès merger in France, which saw the creation of the country’s largest supermarket chain. While the merger initially seemed to signal domination, the rise of discounters such as Lidl and Aldi, coupled with economic challenges, ensured that French consumers retained alternatives. The battle for low prices became crucial, as purchasing power declined, demonstrating that competition remained alive.
A similar trend can be observed in Australia, where four dominant players—Woolworths Group, Coles Group, ALDI, and Metcash (IGA)—collectively control over 80% of the market. Despite this dominance, competition persists due to the steady presence of ALDI and ongoing challenges to consumer spending.
The potential Kroger-Albertsons merger in the USA mirrors these concerns. Critics argue that such a consolidation could diminish competition and lead to higher prices for consumers, especially in regions where these supermarkets dominate. With Walmart already being a behemoth in the American grocery market, some fear that choice will be stifled, and prices will rise. However, as history suggests, consumers are ultimately loyal to their wallets, and discount retailers or new entrants often step in to challenge monopolies.
In the UK, the landscape has shifted with the rise of the ‘Big Six’—Tesco, Sainsbury’s, Asda, Morrisons, Aldi, and Lidl. Discounters Aldi and Lidl only gained significant traction following the 2008 economic crisis, proving that competition can thrive even in concentrated markets. Regulatory bodies have become increasingly vigilant in preventing monopolistic practices and protecting the interests of consumers and suppliers alike. For instance, British supermarkets have been pressured by regulators and campaigners to offer fairer prices to farmers and food producers.
The fundamental purpose of supermarket mergers is to enhance purchasing power, allowing larger chains to negotiate better deals with suppliers—buy big, buy cheap. Yet, regulatory authorities across the globe are scrutinising these mergers more closely, understanding the risks of corporatism. With fewer companies controlling the market, there is always the potential for price manipulation, but strong regulatory frameworks and the persistence of discount chains ensure that competition remains a vital force.
Ultimately, while mergers may grant supermarkets more power, competition is far from extinct. Consumers will always gravitate towards retailers that offer the best prices, maintaining a level of balance in even the most concentrated markets. The challenge for regulators is to maintain this equilibrium, ensuring that market control does not come at the expense of consumer choice or fairness.
