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Merger Review Should Incorporate a Role for Unions

 |  June 21, 2024

By: Eric A. Posner (ProMarket)

The proposed merger between Kroger and Albertsons has drawn objections from unions representing workers at both grocery chains. These objections are understandable. Colorado, in its complaint against the merger, alleged that during a 2022 strike by Kroger workers, Albertsons agreed not to hire those workers away. If the companies merge, it is likely that workers’ bargaining power will be further diminished.

This controversy brings to light the role of unions in merger reviews. Currently, unions representing workers at merging companies have no formal role in the process. However, they can exert pressure on the firms to either abandon or modify their merger plans and may also negotiate concessions in exchange for their support. For example, before the Microsoft-Activision merger in 2023, a union representing Activision workers convinced Microsoft to remain neutral if the union sought to organize former Activision workers post-merger, leading the union to withdraw its opposition.

Unions can also petition regulators and share pertinent information, although they cannot compel regulators to act on their concerns. Union involvement in merger reviews, though informal, is not uncommon. Over the past 25 years, I have reviewed 46 attempted mergers involving union participation. Unions supported seven, opposed 34, and had mixed positions on five. Notable examples include mergers like Amazon-MGM Studios (2021), Abbvie-Allergan (2019), Fiat Chrysler-General Motors (2015), Kraft-Heinz (2015), and Continental-United Airlines (2010). While it is difficult to draw definitive conclusions from such limited evidence, it is clear that many unions are motivated to engage in merger negotiations.

In some instances, unions have even advocated for mergers that management opposed. In 2011, American Airlines filed for bankruptcy due to rising labor costs and increasing competition. When US Airways proposed an acquisition, American’s unions negotiated directly with US Airways management and then demanded that American’s management agree to the deal. This agreement provided workers with better terms than they would have received if American had remained independent post-bankruptcy.